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Exhibit 2.k.(iii)
PURCHASE AGREEMENT
THIS AGREEMENT is made as of this ____ day of May __, 1998 between
the Xxxxxx Xxxxxxxxx Revocable Living Trust, a trust ("Seller") and CVS
Automatic Common Exchange Security Trust, a trust organized under the laws of
the State of New York under and by virtue of an Amended and Restated Trust
Agreement, dated as of May __, 1998 (the "Trust Agreement") (such trust and the
trustees thereof acting in their capacity as such being referred to herein as
"Purchaser").
WHEREAS, Seller owns shares of Common Stock, par value $.01 per
share (the "Common Stock"), of CVS Corporation, a Delaware corporation (the
"Company");
WHEREAS, Purchaser has filed with the Securities and Exchange
Commission a registration statement contemplating the offering of up to
3,047,500 Trust Automatic Common Exchange Securities (the "Securities"), the
terms of which contemplate delivery by Purchaser to the holders thereof of a
number of shares of Common Stock (or, at the option of Sellers, cash in lieu
thereof) on the Exchange Date referred to herein;
WHEREAS, Seller has agreed, pursuant to the Collateral Agreement (the
"Collateral Agreement") dated as of May __, 1998, among Purchaser, Seller, as
Pledgor and The Chase Manhattan Bank, as collateral agent (the "Collateral
Agent"), to grant Purchaser a security interest in shares of Common Stock and
in certain circumstances certain other collateral to secure the obligations of
Seller hereunder;
WHEREAS, Purchaser has agreed, pursuant to an underwriting
agreement, dated May __, 1998 (the "Underwriting Agreement"), among Purchaser,
Seller, the Company and Xxxxxxx Xxxxx & Co. as representatives of the several
underwriters named therein (the "Underwriters"), to issue and sell to the
Underwriters an aggregate of 2,650,000 Securities (the "Firm Securities") and,
at the Underwriters' option, up to 397,500 additional Securities (the "Optional
Securities") to cover overallotments;
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NOW, THEREFORE, in consideration of their mutual covenants herein
contained, the parties hereto, intending to be legally bound, hereby mutually
covenant and agree as follows:
DEFINITIONS
As used herein, the following words and phrases shall have the
following meanings:
"Additional Purchase Price" has the meaning provided in Section
1.2(b).
"Additional Share Base Amount" means a number equal to the number of
Optional Securities that the Underwriters elect to purchase under the
Underwriting Agreement multiplied by a fraction, the numerator of which is the
Firm Share Base Amount and the denominator of which is the number of Firm
Securities.
"Additional Shares" has the meaning provided in Section 1.1(b).
"Additional STRIPS" means the U.S. Treasury obligations purchased by
Purchaser for settlement at the Second Time of Delivery.
"Administrator" means The Chase Manhattan Bank, administrator for
Purchaser under the Administration Agreement dated as of May __, 1998, or any
successor thereto.
"Appreciation Threshold Price" has the meaning provided in Section
1.1(c).
"Average Market Price" per share of Common Stock on any date means
the average Closing Price of a share of Common Stock on the 20 Trading Days
immediately prior to but not including such date, provided that for purposes of
determining the payment required upon cash settlement of this Agreement in
connection with a Rollover Offering, "Average Market Price" means the Closing
Price per share of
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Common Stock on the Trading Day immediately preceding the date that the Rollover
Offering is priced (the "Pricing Date") or, if the Rollover Offering is priced
after 4:00 P.M., New York City time, on the Pricing Date, the Closing Price per
share on the Pricing Date.
"Business Day" means any day on which commercial banks are open for
business in New York City and the New York Stock Exchange is not closed.
"Calculation Period" means any period of Trading Days for which an
average security price must be determined pursuant to this Agreement.
"Cash Settlement Alternative" has the meaning provided in Section
1.3(d).
"Closing Price" of any common equity security (including the Common
Stock or any Marketable Securities) on any date of determination means the daily
closing sale price (or, if no closing sale price is reported, the last reported
sale price) of such common equity security as reported on the NYSE Consolidated
Tape on such date of determination or, if such common equity security is not
listed for trading on the NYSE on any such date, as reported in the composite
transactions for the principal United States securities exchange on which such
common equity security is so listed, or if such common equity security is not so
listed on a United States national or regional securities exchange, as reported
by The NASDAQ National Market or, if such common equity security Stock is not so
reported, the last quoted bid price for such common equity security in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, provided that if any event that results in an adjustment to the
number of shares of Common Stock deliverable hereunder pursuant to Section 6.1
occurs prior to the Exchange Date, the Closing Price of the Common Stock as
determined pursuant to the foregoing will be appropriately adjusted to reflect
the occurrence of such event.
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"Collateral Agreement" means the Collateral Agreement among Seller,
as Pledgor, _________, as Collateral Agent and Purchaser, dated as of May __,
1998.
"common equity security" means any security of any class of capital
stock which has no preference in respect of dividends or of amounts payable in
the event of any voluntary or involuntary liquidation, dissolution or winding up
of the issuer thereof and which is not subject to redemption by the issuer
thereof.
"Company Successor" has the meaning provided in Section 6.2.
"Contract Shares" has the meaning provided in Section 1.1(b).
"Custodian" means The Chase Manhattan Bank, custodian for Purchaser
under the Custodian Agreement dated as of May __, 1998, or any successor
thereto.
"Dilution Adjustment" means any fraction or number by which the
Exchange Rate shall be multiplied pursuant to Section 6.1(a), (b), (c) or (d).
"Event of Default" has the meaning provided in Article VII.
"Excess Purchase Payment" has the meaning provided in Section
6.1(d).
"Exchange Date" means May __, 2001, subject to (i) extension by
Seller pursuant to Section 1.3(e) and (ii) subsequent acceleration by Seller
pursuant to Section 1.3(f).
"Exchange Rate" has the meaning provided in Section 1.1(c).
"Firm Purchase Price" has the meaning provided in Section 1.2(a).
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"Firm Share Base Amount" has the meaning provided in Section 1.1(a).
"Firm Shares" has the meaning provided in Section 1.1(a).
"First Time of Delivery" has the meaning provided in Section 1.3(a).
"Initial Price" has the meaning provided in Section 1.1(c).
"Liens" has the meaning provided in the Collateral Agreement.
"Marketable Securities" has the meaning provided in Section 6.2.
"NYSE" means the New York Stock Exchange, Inc.
"Permitted Dividend" has the meaning provided in Section 6.1(d).
"Reorganization Event" has the meaning provided in Section 6.2.
"Rollover Offering" means a reoffering or refinancing of all (but
not less than all) of the Securities effected not earlier than May __, 2001 by
means of a completed public offering or offerings (which may include one or more
exchange offers) by or on behalf of Seller.
"Second Time of Delivery" has the meaning provided in Section
1.1(b).
"Then-Current Market Price" of the Common Stock, for the purpose of
applying any adjustment pursuant to Section 6.1, means the average Closing Price
per share of the Common Stock for the Calculation Period of 5 Trading Days
immediately prior to the time such adjustment is
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effected (or, in the case of an adjustment effected at the opening of business
on the Business Day next following a record date as described in Section
6.1(f)(i), immediately prior to the earlier of the time such adjustment is
effected and the related ex-date); provided that if no Closing Price for the
Common Stock is determined for one or more (but not all) of such Trading Days,
such Trading Day shall be disregarded in the calculation of the Then-Current
Market Price (but no additional Trading Days shall be added to the Calculation
Period). If no Closing Price for the Common Stock may be determined for any of
such Trading Days, the Then-Current Market Price shall be the Closing Price for
the Common Stock for the most recent Trading Day prior to such 5 Trading Days
for which a Closing Price for the Common Stock may be determined pursuant to the
"Closing Price" definition. The "ex-date" with respect to any dividend,
distribution or issuance shall mean the first date on which the shares of Common
Stock trade regular way on their principal market without the right to receive
such dividend, distribution or issuance.
"Trading Day" in respect of any common equity security means a day
on which such common equity security (A) is not suspended from trading on any
national or regional securities exchange or association or over-the-counter
market at the close of business and (B) has traded at least once on the national
or regional securities exchange or association or over-the-counter market that
is the primary market for the trading of such security.
"Transaction Value" has the meaning provided in Section 6.2.
"Transfer Restrictions" has the meaning provided in the Collateral
Agreement.
"Transferred Security" has the meaning provided in Section 1.3(g).
"Trust Agreement" means the Amended and Restated Trust Agreement
constituting CVS Automatic Common Exchange Security Trust, dated as of May __,
1998.
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"U.S. Government Securities" has the meaning provided in the
Collateral Agreement.
I.
SALE AND PURCHASE
1.1 Sale and Purchase. (a) Firm Shares. Upon the terms and subject
to the conditions of this Agreement, Seller agrees to sell to Purchaser on the
Exchange Date, and Purchaser agrees to purchase and acquire from Seller on the
Exchange Date, the number of shares of Common Stock (the "Firm Shares") equal to
the product of ________ (the "Firm Share Base Amount") and the Exchange Rate.
(b) Additional Shares. Upon the terms and subject to the conditions
of this Agreement, Seller agrees to sell to Purchaser on the Exchange Date, and
Purchaser shall have a right to purchase on the Exchange Date, a number of
additional shares of Common Stock (the "Additional Shares") equal to the product
of the Exchange Rate and the Additional Share Base Amount. If the Underwriters
exercise their option to purchase Optional Securities pursuant to the
Underwriting Agreement, Purchaser shall notify Seller in writing that Purchaser
will purchase the Additional Shares on the Exchange Date, which notice shall
specify the Additional Share Base Amount and the date on which Purchaser shall
deliver the purchase price for the Additional Shares, which shall be the Second
Time of Delivery specified pursuant to Section 2 of the Underwriting Agreement
(the "Second Time of Delivery"). The Firm Shares and the Additional Shares (if
any) are collectively referred to herein as the "Contract Shares".
(c) Exchange Rate. The "Exchange Rate" shall be determined in
accordance with the following formula, subject to adjustment as a result of
certain events as provided in Article VI: (i) if the Average Market Price is
less than $_____ (the "Appreciation Threshold Price") but equal to or greater
than $_______ (the "Initial Price"), a fraction (rounded upward or downward to
the nearest 1/10,000th or, if
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there is not a nearest 1/10,000th, to the next lower 1/10,000th) equal to the
Initial Price divided by the Average Market Price; (ii) if the Average Market
Price is equal to or greater than the Appreciation Threshold Price, _______ and
(iii) if the Average Market Price is less than the Initial Price, 1.
1.2 Purchase Price. (a) Firm Purchase Price. The purchase price for
the Firm Shares (the "Firm Purchase Price") shall be $_________________ in cash.
(b) Additional Purchase Price. The purchase price for the Additional
Shares (the "Additional Purchase Price") shall be an amount equal to (i) the
difference between (1) the aggregate proceeds to Purchaser from the sale of the
Optional Securities and (2) the aggregate cost to Purchaser, as notified by
Purchaser to Seller at the Second Time of Delivery, of the Additional STRIPS,
multiplied by (ii) a fraction, the numerator of which is the Firm Share Base
Amount and the denominator of which is the number of Firm Securities.
1.3 Payment for and Delivery of Contract Shares. (a) First Time of
Delivery. Upon the terms and subject to the conditions of this Agreement,
Purchaser shall deliver to Seller the Firm Purchase Price on May __, 1998 (the
"First Time of Delivery") at the offices of Xxxxxxxx & Xxxxxxxx, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as shall be agreed upon
by Purchaser and Seller, paid by wire transfer to an account designated by
Seller, in Federal (immediately available) funds.
(b) Second Time of Delivery. Upon the terms and subject to the
conditions of this Agreement, Purchaser shall deliver to Seller the Additional
Purchase Price at the Second Time of Delivery at the offices of Xxxxxxxx &
Xxxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as
shall be agreed upon by Purchaser and Seller, paid by wire transfer to an
account designated by Seller, in Federal (immediately available) funds.
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(c) Sale and Delivery of Contract Shares. On the Exchange Date,
Seller agrees to sell and deliver the Contract Shares to Purchaser. Sale and
delivery shall be effected by delivery by the Collateral Agent to the Custodian,
for the account of Purchaser, of shares of Common Stock then held by the
Collateral Agent as collateral under the Collateral Agreement, in an amount
equal to the number of Contract Shares, rounded down to the nearest whole
number. Instead of any fractional shares of Common Stock that would otherwise be
deliverable to Purchaser at the Exchange Date, Seller agrees to make a cash
payment in respect of such fractional shares of Common Stock in an amount equal
to the value thereof at the Average Market Price. Notwithstanding the foregoing,
if a Reorganization Event shall have occurred prior to the Exchange Date then,
in lieu of the foregoing, delivery shall be effected as follows: (i) in the case
of any cash required to be delivered on the Exchange Date as provided in Section
6.2, by wire transfer of immediately available funds to an account designated by
Purchaser; or (ii) in the case of any Marketable Securities elected by Seller to
be delivered in lieu of cash as provided in Section 6.2, at Seller's election,
by instruction to the Collateral Agent to deliver to the Custodian, for the
account of Purchaser, a specified number of Marketable Securities then held as
collateral under the Collateral Agreement, as provided in Section 6(g) of the
Collateral Agreement.
(d) Cash Settlement Alternative. At its option, Seller may deliver
to Purchaser on the Exchange Date, in lieu of the Contract Shares, an amount in
cash equal to the Average Market Price of the Contract Shares (the "Cash
Settlement Alternative"), paid by wire transfer to an account designated by
Custodian, in Federal (immediately available) funds; provided that in connection
with a Rollover Offering which is consummated and as to which Seller has duly
elected the Cash Settlement Alternative, such cash payment shall be made not
later than the fifth Trading Day after the Exchange Date. Seller may request the
Cash Settlement Alternative in respect of all, but not less than all, Contract
Shares and may do so by notice to Purchaser, the Collateral Agent and the
Custodian not less
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than 35 days prior to the Exchange Date (specifying whether such cash settlement
is being made in connection with a Rollover Offering). If Seller elects the Cash
Settlement Alternative and so notifies Purchaser, Purchaser shall provide notice
of such election (specifying whether such cash settlement is being made in
connection with a Rollover Offering) to the holders of the Securities, not less
than thirty (30) nor more than ninety (90) days prior to the Exchange Date.
(e) Extension of Exchange Date. At its option, Seller may, by notice
given to Purchaser not earlier than March __, 2001 and not later than April __,
2001, elect to extend the Exchange Date to August __, 2001, provided that such
extension shall be effective only if Seller shall have:
(i) delivered to the Custodian, for the account of and subject to
the exclusive control of Purchaser, free of any adverse claims, U.S.
Government Securities which through the scheduled payment of principal and
interest in accordance with their terms will provide, not later than one
Business Day before August __, 2001, money in an amount equal to not less
than the product of (1) $______ and (2) a fraction, the numerator of which
is the sum of the Firm Share Base Amount and the Additional Share Base
Amount and the denominator of which is the number of Firm Securities; and
(ii) delivered to Purchaser (1) a certificate of Seller
substantially in the form of Exhibit A hereto and dated the date of such
delivery (A) identifying the U.S. Government Securities being transferred,
(B) certifying that with respect to such U.S. Government Securities the
representations and warranties contained in such Exhibit A hereto are true
and correct on and as of the date thereof and (C) certifying that such
U.S. Government Securities satisfy the condition set forth in paragraph
1.3(e)(i), and (2) an opinion, dated the date of such delivery, of counsel
addressed to
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Purchaser confirming the representations contained in the second sentence
of paragraph 2(c) to Exhibit A hereto.
In addition, Seller hereby covenants and agrees to take all other actions
necessary to cause Purchaser to be a protected purchaser of such U.S. Government
Securities, within the meaning of Article 8 of the New York Uniform Commercial
Code, as amended.
If Seller elects to extend the Exchange Date and so notifies
Purchaser, Purchaser shall provide notice of such election to the holders of the
Securities not later than April __, 2001.
(f) Acceleration of Exchange Date. At any time after the Exchange
Date has been extended pursuant to Section 1.3(e) hereof, Seller may, at its
option in connection with the consummation of a Rollover Offering, accelerate
the Exchange Date to any date on or after May __, 2001, by notice to Purchaser
not later than ____ a.m. on the date to which the Exchange Date is accelerated;
provided that such acceleration shall be effective only if at or prior to ___
a.m. on such accelerated Exchange Date, Seller has paid to Purchaser, by wire
transfer to an account designated by Custodian, in Federal (immediately
available) funds, an amount equal to the product of (i) the aggregate accrued
and unpaid quarterly distributions on all outstanding Securities (computed on
the basis of an aggregate quarterly distribution of $______ and a 360-day year
comprised of 12 30-day months) and (ii) a fraction, the numerator of which is
the sum of the Firm Share Base Amount and the Additional Share Base Amount and
the denominator of which is the number of Firm Securities. Upon receipt of such
amount in immediately available funds, Purchaser shall promptly deliver to
Seller, free of any adverse claim, the U.S. Government Securities previously
delivered by Seller to Purchaser pursuant to Section 1.3(e) (together with any
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payments theretofore received by Purchaser in respect thereof).
If Seller elects to accelerate the Exchange Date and so notifies
Purchaser, Purchaser shall provide notice of such election to the holders of the
Securities not later than the accelerated Exchange Date.
(g) Satisfaction of Obligations. Notwithstanding any other provision
of this Article I, if on or prior to the Exchange Date, Seller transfers
Securities (any Securities so transferred being hereinafter referred to as the
"Transferred Securities") to Purchaser, free and clear of any adverse claim, for
cancellation, then the number of Contract Shares deliverable by Seller pursuant
to this Agreement shall be reduced by a number equal to the product of (i) the
number of Contract Shares and (ii) a fraction, the numerator of which is the
number of Transferred Securities and the denominator of which is the sum of the
Firm Share Base Amount and the Additional Share Base Amount.
II.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser that each representation
and warranty made by Seller pursuant to Section 1(b) of the Underwriting
Agreement is true and correct on the date hereof.
III.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller that each representation
and warranty made by Purchaser pursuant to Section 1(a) of the Underwriting
Agreement is true and correct on the date hereof.
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IV.
CONDITIONS TO PURCHASER'S OBLIGATIONS
(a) The obligation of Purchaser to deliver the Firm Purchase Price
at the First Time of Delivery is subject to the condition that the purchase by
the Underwriters of the Firm Securities pursuant to the Underwriting Agreement
shall have been consummated as contemplated under the Underwriting Agreement.
(b) The obligation of Purchaser to deliver the Additional Purchase
Price at the Second Time of Delivery is subject to the condition that the
purchase by the Underwriters of the Optional Securities shall have been
consummated as contemplated under the Underwriting Agreement.
V.
COVENANTS
5.1 Taxes. Seller shall pay any and all documentary, stamp, transfer
or similar taxes and charges that may be payable in respect of the entry into
this Agreement and the transfer and delivery of the Contract Shares pursuant
hereto.
5.2 Forward Contract. Seller hereby agrees that: (i) it will not
treat this Agreement, any portion of this Agreement, or any obligation hereunder
as giving rise to any interest income or other inclusions of ordinary income;
(ii) it will not treat the delivery of any portion of the Contract Shares, cash
or Marketable Securities to be delivered pursuant to this Agreement as the
payment of interest or ordinary income; (iii) it will treat this Agreement in
its entirety as a forward contract for the delivery of such Contract Shares,
cash or Marketable Securities; and (iv) it will not take any action (including
filing any tax return or form or taking any position in any tax proceeding) that
is inconsistent with the obligations
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contained in clause (i) through (iii). Notwithstanding the preceding sentence,
Seller may take any action or position required by law, provided that Seller
delivers to Purchaser an unqualified opinion of counsel, nationally recognized
as expert in Federal tax matters, to the effect that such action or position is
required by a statutory change, Treasury regulation, or applicable court
decision published after the date of this Agreement.
5.3 Limitations on Trading During Certain Days. Seller hereby agrees
that it will not buy shares of Common Stock for its own account during the 60
days prior to the Exchange Date.
5.4 Notices. Seller will cause to be delivered to Purchaser:
(a) Immediately upon the occurrence of any Event of Default
hereunder or under the Collateral Agreement, or upon Seller's obtaining
knowledge that any of the conditions or events described in paragraph (a) or (b)
of Article VII shall have occurred with respect to the Company, notice of such
occurrence; and
(b) In case at any time prior to the Exchange Date Seller receives
notice, or otherwise obtains knowledge, that any event requiring that an
adjustment be effected pursuant to Article VI hereof shall have occurred or be
pending, then Seller shall promptly cause to be delivered to Purchaser a notice
identifying such event and stating, if known to Seller, the date on which such
event is to occur and, if applicable, the record date relating to such event.
Seller shall cause further notices to be delivered to Purchaser if Seller shall
subsequently receive notice, or otherwise obtain knowledge, of any further or
revised information regarding the terms or timing of such event or any record
date relating thereto.
5.5 Further Assurances. From time to time on and after the date
hereof through the Exchange Date, each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all action and to do, or
cause
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to be done, all things necessary, proper and advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement in accordance with the terms and conditions hereof, including (i)
using reasonable best efforts to remove any legal impediment to the consummation
of such transactions and (ii) the execution and delivery of all such deeds,
agreements, assignments and further instruments of transfer and conveyance
necessary, proper or advisable to consummate and make effective the transactions
contemplated by the Agreement in accordance with the terms and conditions
hereof.
VI.
ADJUSTMENT OF EXCHANGE RATE, APPRECIATION THRESHOLD PRICE,
INITIAL PRICE AND CLOSING PRICE
6.1 Dilution Adjustments. The Exchange Rate, Appreciation Threshold
Price and Initial Price shall be subject to adjustment from time to time as
follows:
(a) Stock Dividends, Splits, Reclassifications, Etc. If the Company
shall, after the date hereof,
(i) pay a stock dividend or make a distribution with respect to the
Common Stock in shares of such stock;
(ii) subdivide or split the outstanding shares of Common Stock into
a greater number of shares of Common Stock;
(iii) combine the outstanding shares of Common Stock into a smaller
number of shares; or
(iv) issue by reclassification of shares of its Common Stock any
shares of other common stock of the Company;
then, in each such case, the Exchange Rate shall be multiplied by a Dilution
Adjustment equal to the number of
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shares of Common Stock (or in the case of a reclassification referred to in
clause (iv) above, the number of shares of other common stock of the Company
issued pursuant thereto), or the fraction thereof, that a holder who held one
share of Common Stock immediately prior to such event would be entitled solely
by reason of such event to hold immediately after such event. The Appreciation
Threshold Price and Initial Price shall also be adjusted in the manner described
in paragraph (e).
(b) Right or Warrant Issuances. If the Company shall, after the date
hereof, issue, or declare a record date in respect of an issuance of, rights or
warrants to all holders of Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the Then-Current
Market Price of the Common Stock (other than rights to purchase Common Stock
pursuant to a plan for the reinvestment of dividends or interest), then, in each
such case, the Exchange Rate shall be multiplied by a Dilution Adjustment equal
to a fraction of which the numerator shall be the number of shares of Common
Stock outstanding immediately prior to the time the adjustment is effected by
reason of the issuance of such rights or warrants, plus the number of additional
shares of Common Stock offered for subscription or purchase pursuant to such
rights or warrants, and of which the denominator shall be the number of shares
of Common Stock outstanding immediately prior to the time the adjustment is
effected, plus the number of additional shares of Common Stock which the
aggregate offering price of the total number of shares of Common Stock so
offered for subscription or purchase pursuant to such rights or warrants would
purchase at the Then-Current Market Price of the Common Stock, which shall be
determined by multiplying the total number of shares so offered for subscription
or purchase by the exercise price of such rights or warrants and dividing the
product so obtained by such Then-Current Market Price. To the extent that, after
the expiration of such rights or warrants, the shares of Common Stock offered
thereby shall not have been delivered, the Exchange Rate shall be further
adjusted to equal the Exchange Rate which would have been in effect had such
adjustment for the issuance of such rights or warrants
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been made upon the basis of delivery of only the number of shares of Common
Stock actually delivered. The Appreciation Threshold Price and Initial Price
shall also be adjusted in the manner described in paragraph (e).
(c) Distributions of Other Assets. If the Company shall, after the
date hereof, declare or pay a dividend or make a distribution to all holders of
Common Stock, in either case, of evidences of its indebtedness or other non-cash
assets (excluding any dividends or distributions referred to in paragraph (a)
above) or shall issue to all holders of Common Stock rights or warrants to
subscribe for or purchase any of its securities (other than rights or warrants
referred to in paragraph (b) above), then, in each such case, the Exchange Rate
shall be multiplied by a Dilution Adjustment equal to a fraction, of which the
numerator shall be the Then-Current Market Price per share of the Common Stock,
and of which the denominator shall be such Then-Current Market Price per share
less the fair market value (as determined by a nationally recognized independent
investment banking firm retained for this purpose by the Administrator) as of
the time the adjustment is effected of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights or warrants
applicable to one share of Common Stock. The Appreciation Threshold Price and
Initial Price shall also be adjusted in the manner described in subparagraph
(e).
(d) Cash Dividends; Excess Purchase Payments. If the Company shall,
after the date hereof, declare a record date in respect of a distribution of
cash (other than any Permitted Dividend, any cash distributed in consideration
of fractional shares of Common Stock and any cash distributed in a
Reorganization Event), by dividend or otherwise, to all holders of Common Stock,
or make an Excess Purchase Payment, then the Exchange Rate will be multiplied by
a Dilution Adjustment equal to a fraction, of which the numerator shall be the
Then-Current Market Price of the Common Stock on such record date, and of which
the denominator shall be such Then-Current Market Price less the amount of such
distribution applicable to one share of Common Stock which would not be a
Permitted Dividend (or in the case of an
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Excess Purchase Payment, less the aggregate amount of such Excess Purchase
Payment for which adjustment is being made at such time divided by the number of
shares of Common Stock outstanding on such record date). For purposes of these
adjustments, (A) "Permitted Dividend" means any quarterly cash dividend in
respect of the Common Stock, other than a quarterly cash dividend that exceeds
the immediately preceding quarterly cash dividend, and then only to the extent
that the per share amount of such dividend results in an annualized dividend
yield on the Common Stock in excess of 12.5% and (B) "Excess Purchase
Payment" means the excess, if any, of (x) the cash and the value (as determined
by a nationally recognized independent investment banking firm retained for this
purpose by the Administrator, whose determination shall be final) of all other
consideration paid by the Company with respect to one share of Common Stock
acquired in a tender offer or exchange offer by the Company, over (y) the
Then-Current Market Price of the Common Stock. The Appreciation Threshold Price
and Initial Price shall also be adjusted in the manner described in subparagraph
(e).
(e) Corresponding Adjustments to Initial Price, Appreciation
Threshold Price and Closing Price; Change in Principal Market. (i) If any
adjustment is made to the Exchange Rate pursuant to paragraph (a), (b), (c) or
(d) of this Section 6.1, an adjustment shall also be made to the Appreciation
Threshold Price and the Initial Price. The required adjustment shall be made by
dividing each of the Appreciation Threshold Price and the Initial Price by the
relevant Dilution Adjustment.
(ii) If, during any Calculation Period used in calculating the
Average Market Price, the Then-Current Market Price or the Transaction Value,
there shall occur any event requiring an adjustment to be effected pursuant to
this Section 6.1, then the Closing Price for each Trading Day in the Calculation
Period occurring prior to the day on which such adjustment is effected shall be
adjusted by being divided by the relevant Dilution Adjustment.
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(f) Timing of Dilution Adjustments. Each Dilution Adjustment shall
be effected:
(i) in the case of any dividend, distribution or issuance, at the
opening of business on the Business Day next following the record date for
determination of holders of Common Stock entitled to receive such
dividend, distribution or issuance or, if the announcement of any such
dividend, distribution or issuance is after such record date, at the time
such dividend, distribution or issuance shall be announced by the Company;
(ii) in the case of any subdivision, split, combination or
reclassification, on the effective date of such transaction;
(iii) in the case of any Excess Purchase Payment for which the
Company shall announce, at or prior to the time it commences the relevant
share repurchase, the repurchase price per share for shares proposed to be
repurchased, on the date of such announcement; and
(iv) in the case of any other Excess Purchase Payment, on the date
that the holders of the repurchased shares become entitled to payment in
respect thereof.
(g) General; Failure of Dilution Event to Occur. All Dilution
Adjustments shall be rounded upward or downward to the nearest 1/10,000th (or if
there is not a nearest 1/10,000th, to the next lower 1/10,000th). No adjustment
in the Exchange Rate shall be required unless such adjustment would require an
increase or decrease of at least one percent therein; provided, however, that
any adjustments which by reason of this sentence are not required to be made
shall be carried forward and taken into account in any subsequent adjustment. If
any announcement or declaration of a record date in respect of a dividend,
distribution, issuance or
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repurchase requiring an adjustment pursuant to this Section 6.1
shall subsequently be cancelled by the Company, or such dividend, distribution,
issuance or repurchase shall fail to receive requisite approvals or shall fail
to occur for any other reason, then, upon such cancellation, failure of approval
or failure to occur, the Exchange Rate shall be further adjusted to the Exchange
Rate which would then have been in effect had adjustment for such event not been
made. If after an announcement of a share repurchase requiring an adjustment
pursuant to this Section 6.1, the Company reduces the repurchase price or
repurchases fewer shares than announced, then upon completion of such share
repurchase the Exchange Rate shall be further adjusted to equal the Exchange
Rate that would have been in effect had the adjustment for such repurchase been
based on the actual price and amount repurchased. If a Reorganization Event
shall occur after the occurrence of one or more events requiring an adjustment
pursuant to this Section 6.1, the Dilution Adjustments previously applied to the
Exchange Rate in respect of such events shall not be rescinded but shall be
applied to the new Exchange Rate provided for under Section 6.2.
6.2 Adjustment for Consolidation, Merger or Other Reorganization
Event. In the event of (i) any consolidation or merger of the Company, or any
surviving entity or subsequent surviving entity of the Company (a "Company
Successor"), with or into another entity (other than a merger or consolidation
in which the Company is the continuing corporation and in which the Common Stock
outstanding immediately prior to the merger or consolidation is not exchanged
for cash, securities or other property of the Company or another corporation),
(ii) any sale, transfer, lease or conveyance to another corporation of the
property of the Company or any Company Successor as an entirety or substantially
as an entirety, (iii) any statutory exchange of securities of the Company or any
Company Successor with another corporation (other than in connection with a
merger or acquisition) or (iv) any liquidation, dissolution or winding up of the
Company or any Company Successor (any such event described in clause (i), (ii),
(iii) or (iv), a "Reorganization Event"), the Exchange Rate shall be adjusted so
that on the Exchange Date Purchaser shall receive, in lieu of the Contract
Shares, cash in an amount equal to the product of (x) the Firm Share
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Base Amount plus the Additional Share Base Amount and (y)(i) if the Transaction
Value is less than the Appreciation Threshold Price but equal to or greater than
the Initial Price, the Initial Price, (ii) if the Transaction Value is equal to
or greater than the Appreciation Threshold Price, 0.______ multiplied by the
Transaction Value, and (iii) if the Transaction Value is less than the Initial
Price, the Transaction Value. Notwithstanding the foregoing, (A) if the
consideration received by holders of Common Stock in such Reorganization Event
does not include Marketable Securities, then the Seller's delivery obligation
under this Agreement will be accelerated, and the Seller will deliver the
Transaction Value to Purchaser promptly upon consummation of the Reorganization
Event; and (B) if any Marketable Securities are received by holders of Common
Stock in such Reorganization Event, Seller may, at its option, in lieu of
delivering cash as described above, deliver an equivalent amount (based on the
value determined in accordance with clause (z) of the following paragraph) of
Marketable Securities, but not exceeding, as a percentage of the total
consideration required to be delivered, the percentage of the total Transaction
Value attributable to such Marketable Securities.
"Transaction Value" means the sum of: (x) for any cash received in
any such Reorganization Event, the amount of cash received per share of Common
Stock; (y) for any property other than cash or Marketable Securities received in
any such Reorganization Event, an amount equal to the market value on the date
the Reorganization Event is consummated of such property received per share of
Common Stock, as determined by a nationally recognized independent investment
banking firm retained for this purpose by the Administrator; and (z) for any
Marketable Securities received in any such Reorganization Event, an amount equal
to the average Closing Price per share of such Marketable Securities for the
Calculation Period of 20 Trading Days immediately prior to the Exchange Date
multiplied by the number of such Marketable Securities received for each share
of Common Stock; provided that if no Closing Price for such Marketable
Securities may be determined for one or more (but
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not all) of such Trading Days, such Trading Day shall be disregarded in the
calculation of such average Closing Price (but no additional Trading Days shall
be added to the Calculation Period). If no Closing Price for the Marketable
Securities may be determined for all such Trading Days, the calculation in the
preceding clause (z) shall be based on the most recently available Closing Price
for the Marketable Securities prior to such 20 Trading Days.
"Marketable Securities" means any common equity securities listed on
a U.S. national securities exchange or reported by The Nasdaq National Market.
The number of shares of any Marketable Securities included in the calculation of
Transaction Value pursuant to the preceding clause (z) shall be subject to
adjustment if any event that would, had it occurred with respect to the Common
Stock or the Company, have required an adjustment pursuant to Section 6.1, shall
occur with respect to such Marketable Securities or the issuer thereof between
the time of the Reorganization Event and the Exchange Date. Adjustment for such
subsequent events shall be as nearly equivalent as practicable to the
adjustments provided for in Section 6.1.
VII.
ACCELERATION
If one or more of the following events (each an "Event of Default")
shall occur:
(a) Seller shall commence a voluntary case or other proceeding
seeking a liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall take any action to authorize any of the
foregoing;
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(b) an involuntary case or other proceeding shall be commenced
against the Seller seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or an order for relief shall
be entered against the Seller under the federal bankruptcy laws as now or
hereafter in effect; or
(c) a Collateral Event of Default within the meaning of the
Collateral Agreement;
then, upon the occurrence of any such event, Seller shall become obligated to
deliver the Contract Shares (or, after a Reorganization Event, the Marketable
Securities or cash or combination thereof deliverable in respect thereof), or
any U.S. Government Securities then pledged under the Collateral Agreement in
respect thereof. Purchaser and Seller agree that such amount is a reasonable
pre-estimate of loss and not a penalty. Such amount is payable for the loss of
bargain and Purchaser will not be entitled to recover additional damages as a
consequence of loss resulting from an Event of Default.
VIII.
MISCELLANEOUS
8.1 Adjustments of Exchange Rate; Selection of Independent
Investment Banking Firm. Purchaser shall be responsible for the effectuation and
calculation of any adjustment pursuant to Article VI hereof and shall furnish
Seller notice of any such adjustment and shall provide Seller reasonable
opportunity to review the calculations pertaining to any such adjustment. If,
pursuant to the terms and conditions hereof, the Administrator shall be required
to retain a nationally recognized independent investment banking firm for any
purpose provided herein, such nationally recognized independent
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investment banking firm shall be selected and retained by the Administrator only
after consultation with Seller.
8.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given if mailed or transmitted
by any standard forms of telecommunication. Notices to Purchaser shall be
directed to it in care of the Administrator for Purchaser, The Chase Manhattan
Bank, at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Telecopy No. _________,
attention _________________; notices to Seller shall be directed to it at
_______________________________, Telecopy No._________________.
8.3 Governing Law; Severability. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York. To the
extent permitted by law, the unenforceability or invalidity of any provision or
provisions of this Agreement shall not render any other provision or provisions
herein contained unenforceable or invalid.
8.4 Entire Agreement. Except as expressly set forth herein, this
Agreement constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior agreements, understandings and
negotiations, both written and oral, among the parties with respect to the
subject matter of this Agreement.
8.5 Amendments; Waivers. Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Purchaser and Seller or, in the case of
a waiver, by the party against whom the waiver is to be effective. No failure or
delay by either party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise
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thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
8.6 No Third Party Rights; Successors and Assigns. This Agreement is
not intended and shall not be construed to create any rights in any person other
than Seller and Purchaser and their respective successors and assigns and no
person shall assert any rights as third party beneficiary hereunder. Whenever
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and assigns of such party. All the covenants and
agreements herein contained by or on behalf of the Seller and Purchaser shall
bind, and inure to the benefit of, their respective successors and assigns
whether so expressed or not, and shall be enforceable by and inure to the
benefit of Purchaser and its successors and assigns.
8.7 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
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IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date and year first above written.
SELLER:
Xxxxxx Xxxxxxxxx
Revocable Living Trust
By: _______________________________
Xxxxxx Xxxxxxxxx, as trustee
PURCHASER:
______________________, as trustee,
Xxxxxx X. Xxxxxxx
______________________, as trustee,
Xxxxxxx X. Xxxxxx, III
______________________, as trustee,
Xxxxx X. X'Xxxx
each as trustee of CVS Automatic
Common Exchange Security Trust
27
Exhibit A
to
Purchase Agreement
CERTIFICATE FOR EXTENSION OF EXCHANGE DATE
The undersigned, Xxxxxx Xxxxxxxxx Revocable Living Trust ("Seller),
hereby certifies, pursuant to Section 1.3(e) of the Purchase Agreement, dated
as of May __, 1998, among Seller and CVS AUTOMATIC COMMON EXCHANGE SECURITY
TRUST (the "Purchase Agreement"; terms defined in the Purchase Agreement being
used herein as defined therein), that:
1. Seller is transferring the following U.S. Government Securities
to Purchaser:
2. Seller hereby represents and warrants to Purchaser that:
(a) Consents to Transfer. No Transfer Restrictions exist with
respect to or otherwise apply to the transfer by Seller of such U.S. Government
Securities to Purchaser.
(b) Delivery. Seller has delivered to the Custodian, for the account
of and subject to the exclusive control of Purchaser, free of any adverse
claims, U.S. Government Securities which through the scheduled payment of
principal and interest in accordance with their terms will provide, not later
than one Business Day before August __, 2001, money in an amount equal to not
less than the product of (1) $______ and (2) a fraction, the numerator of which
is the sum of the Firm Share Base Amount and the Additional Share Base Amount
and the denominator of which is the number of Firm Securities.
(c) Title. Seller has good and marketable title to such U.S.
Government Securities, free of all Liens and Transfer Restrictions. Upon
delivery of such U.S. Government Securities to Purchaser, Purchaser will obtain
good and marketable title to such U.S. Government Securities free of any adverse
claims.
IN WITNESS WHEREOF, the undersigned has executed this certificate
this ____ day of ____________, _____.
28
Xxxxxx Xxxxxxxxx
Revocable Living Trust
By: _____________________________
Xxxxxx Xxxxxxxxx
