1
KONINKLIJKE AHOLD N.V.
Xxxxxx Xxxxxxxx 0
0000 XX Xxxxxxx
Xxx Xxxxxxxxxxx
April 27, 1998
The 1224 Corporation
0000 Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Gentlemen:
This letter confirms our mutual understandings and intentions
concerning negotiations between Koninklijke Ahold N.V. (the "Purchaser") and The
1224 Corporation (the "Seller"), regarding the possible purchase by the
Purchaser, directly or through one of its affiliates, of all of the outstanding
Class AC Voting Common Stock (the "AC Shares") of Giant Food Inc. (the
"Company") from the Seller. It is the parties' intention that the negotiations
regarding such possible purchase and of definitive transaction documents
continue after the execution of this letter and the parties each agree to
negotiate in good faith.
During the period from the date hereof until May 31, 1998,
none of the Seller, or any of its officers, directors, employees,
representatives, agents or advisors (collectively "Agents") shall, directly or
indirectly, take any action (other than an action directly related to
negotiations with the Purchaser) to (i) encourage, initiate or solicit the
making of an Acquisition Proposal (as defined below), (ii) engage in discussions
or negotiations with, or provide any information to, any entity or person in
connection with, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal, or (iii) enter into an agreement with respect to
an Acquisition Proposal; provided, however, that, subject to compliance by the
Seller with the immediately succeeding sentence, (a) the Seller, in response to
an unsolicited Acquisition Proposal from X. Xxxxxxxxx (USA) Holdings Inc. or any
affiliate thereof (collectively "Sainsbury"), may participate in discussions or
negotiations with, or furnish information to, Sainsbury if the Board of
Directors of the Seller reasonably determines that the unsolicited Acquisition
Proposal proposed by Sainsbury is reasonably likely to result in a Sainsbury
Superior Proposal (as defined below) and believes (based upon the advice of
outside legal advisors of recognized standing in the state of Delaware) that
failing to take such action is reasonably likely to constitute a breach of its
fiduciary duties and (b) the Seller may enter into an agreement with respect to
a Sainsbury Superior Proposal if, within ten days of receipt of written notice
from the Seller with respect to such Sainsbury Superior Proposal pursuant to
subclause (i) of the next succeeding sentence, the Purchaser fails to have (1)
executed and delivered to the Seller a Stock Purchase Agreement in substantially
the form of the April 17, 1998 draft of the Stock Purchase Agreement by and
between the Purchaser and the Seller relating to the purchase by the Purchaser
from the Seller of the AC Shares (the "Draft AC
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April 27, 1998
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Stock Purchase Agreement"), but as modified (w) to eliminate the condition
contained in Section 6.6 of the Draft AC Stock Purchase Agreement and all
references to a stock purchase agreement by and between the Purchaser and
Sainsbury, (x) to change all references to the Agreement and Plan of Merger by
and among the Purchaser, a wholly-owned subsidiary thereof and the Company (the
"Merger Agreement") so as to refer instead to the agreement referred to in
subclause (2) of this sentence, (y) to include in Section 2.2 thereof as the
price to be paid per AC Share by the Purchaser to the Seller thereunder the
Agreed Upon Price (as defined below) or, if there is no Agreed Upon Price, the
price per AC Share offered by Sainsbury to the Seller pursuant to the Sainsbury
Superior Proposal and (z) to reflect the mutually acceptable resolution of the
issues that have been raised by the Purchaser or the Seller with respect to the
Draft AC Stock Purchase Agreement and that have not been resolved prior to the
date hereof which resolution the Purchaser and the Seller agree to negotiate in
good faith, and (2) executed and delivered to the Company an agreement
containing the representations, warranties and covenants contained in the April
17, 1998 draft of the Merger Agreement (the "Draft Merger Agreement") as
modified to reflect the mutually acceptable resolution of the issues that have
been raised by the Purchaser, the Seller or the Company with respect to the
Draft Merger Agreement and that have not been resolved prior to the date hereof,
which resolution the Purchaser and the Seller agree (and the Seller agrees to
use its best efforts to cause the Company) to negotiate in good faith. The
Seller promptly shall advise the Purchaser (i) orally and in writing of the
receipt of any Acquisition Proposal (including from or otherwise involving
Sainsbury) and of the identity of the entity or person making such Acquisition
Proposal and of the material terms thereof and of any changes thereto and (ii)
orally prior to commencing any discussions or negotiations between the Seller or
any of its Agents, on the one hand, and Sainsbury or any of its Agents, on the
other hand, (x) regarding an Acquisition Proposal by Sainsbury or (y) which
could reasonably lead to a Sainsbury Superior Proposal, and subsequently
regarding the progress of any such negotiations or discussions.
As used herein the term "Acquisition Proposal" means any
proposal to purchase or acquire, directly or indirectly, all or any of the AC
Shares of the Company, a substantial amount of the assets of the Company or any
of its subsidiaries or more than 10% of any class of equity securities of the
Company or any of its subsidiaries, any tender offer or exchange offer that if
consummated would result in any person beneficially owning more than 10% of any
class of equity securities of the Company or any of its subsidiaries, any
merger, consolidation, business combination, sale of substantially all the
assets, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any other transaction, the consummation of which could
reasonably be expected to dilute materially the benefits to the Purchaser of the
acquisition of the AC Shares. As used herein the term "Sainsbury Superior
Proposal" means any bona fide proposal from or otherwise involving Sainsbury to
purchase all of the AC Shares of the Company in cash at a price per share that
is either (x) greater than the price per AC Share agreed upon at the time by the
Purchaser and the Seller (the "Agreed Upon Price") or (y) if the Purchaser and
the Seller have not reached an agreement on the price to be paid per AC Share,
greater than the price per AC Share most recently proposed to the Seller by the
Purchaser, and on terms which the Board of Directors of the Seller determines in
its good faith reasonable judgment (based upon the advice of
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April 27, 1998
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outside financial and legal advisors) to be as or more favorable to the Seller
and the Company than the transactions contemplated by the Draft AC Stock
Purchase Agreement (i) which is not subject to a financing condition and as to
which Sainsbury has represented and warranted to the Seller in writing that
financing is or will be available and (ii) which does not provide for any
breakup fee or other inducement to Sainsbury other than reimbursement of
documented out-of-pocket expenses incurred in connection with the Sainsbury
Superior Proposal.
Except as otherwise required by law, neither of the parties
hereto (nor any affiliate, or Agent thereof) shall issue any press release or
make any other statement intended for public distribution relating to, or
connected with, this letter or the matters contained herein without obtaining
the prior approval of the other party hereto.
Each of the parties hereto recognizes and acknowledges that a
breach by it of any agreements contained in this letter will cause the other
party to sustain damages for which it would not have an adequate remedy at law
for money damages, and therefore each of the parties hereto agrees that in the
event of any such breach the aggrieved party shall be entitled to the remedy of
specific performance of such agreements and injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or in
equity.
Except for the agreements set forth in the three immediately
preceding paragraphs), this letter does not represent any binding commitment or
legal obligation of any kind whatsoever by the Purchaser or the Seller in
connection herewith with respect to the transaction contemplated hereby. Such
binding commitment or legal obligation shall arise only when and if the
definitive transaction documents, developed as a result of the negotiations
between the parties are in fact executed by the parties.
Notwithstanding anything contained in this letter to the
contrary, this letter may be terminated by either the Purchaser or the Seller
upon delivery of written notice to the other party to such effect if the
Purchaser and Seller have not agreed on or prior to May 4, 1998 upon the price
per AC Share that would be paid by the Purchaser to the Seller pursuant to the
AC Stock Purchase Agreement. In the event of such termination, this letter shall
become void and have no further effect.
This letter shall not be amended or modified except in writing
signed by the parties hereto.
This letter shall be governed by, and construed in accordance
with, the laws of the State of Delaware. The parties agree that any legal action
or proceeding relating to this letter, or for recognition and enforcement of any
judgment in respect thereof, shall be instituted in the courts of the State of
Delaware, the courts of the United States of America located in Delaware and
appellate courts of any thereof.
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April 27, 1998
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This letter may be executed in one or more counterparts, each
of which shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
If the foregoing correctly sets forth our mutual understanding
with respect to the proposed negotiations, please so indicate by signing the
enclosed copy of this letter and returning it to us.
KONINKLIJKE AHOLD N.V.
By /s/ Xxxxxx Xxxxxxxxxxx
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Name: Xxxxxx Xxxxxxxxxxx
Title: Executive Vice President
Acknowledged and Agreed, this
27 day of April, 1998
THE 1224 CORPORATION
By /s/ Xxxxx X. Xxxxxxxx
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Name: Xxxxx X. Xxxxxxxx
Title: Vice President and Secretary
