Exhibit (c)(9)
MEMORANDUM OF UNDERSTANDING
This MEMORANDUM OF UNDERSTANDING is entered into as of May 19, 1999 among
the plaintiff ("Plaintiff") in the Action (as defined herein), and Supermarkets
General Holdings Corporation ("SMG"), SMG-II Holdings Corporation ("SMG-II"),
members of SMG's Board of Directors, and Ahold Acquisition, Inc. ("Ahold")
(collectively, "Defendants") by the undersigned attorneys.
WHEREAS, there is now pending an action in the Court of Chancery of the
State of Delaware, styled ▇▇▇▇▇▇▇ v. Supermarkets General Holdings Corp., et
al., C.A. No. 17047 (the "Action"); and
WHEREAS, the Action was filed as a putative class action on behalf of the
public holders of SMG's $3.52 Cumulative Exchangeable Redeemable Preferred
Stock, par value $0.01 per share (the "Preferred Stock"), relating to the
proposed acquisition of SMG-II and SMG, the ultimate corporate parents of
Pathmark Stores, Inc. ("Pathmark"), via a tender offer and merger (the
"Transaction"), and an alternative transaction structure whereby, under certain
circumstances, Ahold will acquire the Pathmark stock owned by PTK Holdings, Inc.
("PTK"), a wholly-owned subsidiary of SMG (the "Alternative Transaction"); and
WHEREAS, the Action names as defendants SMG, SMG-II, Ahold, and individual
members of the SMG Board of Directors; and
WHEREAS, the Action seeks injunctive and declaratory relief and/or
monetary damages with respect to the Transaction and the Alternative Transaction
based upon the allegation, inter alia, that the conduct of SMG-II (as majority
shareholder of SMG) and the members of the SMG Board of Directors in connection
with the Transaction and the Alternative Transaction constitutes a breach of
their fiduciary duties, aided and abetted by Ahold; and
WHEREAS, the Defendants deny that they have committed or have attempted to
commit any violation of law or breach of duty, including breach of any duty to
SMG's shareholders, or have otherwise acted in any improper manner; and
WHEREAS, following expedited document production, depositions, briefing
and arms-length negotiations between the parties, counsel for the parties have
reached an agreement in principle providing for the proposed settlement of the
Action on the terms and conditions set forth below (the "Settlement"); and
WHEREAS, counsel for the parties believe that the proposed Settlement is
in the best interests of the holders of the Preferred Stock;
NOW THEREFORE, IT IS HEREBY AGREED IN PRINCIPLE AS FOLLOWS:
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1. Principal Terms of Settlement. Subject to the additional conditions,
terms and limitations described herein, as a result of the bringing of the
Action, the parties agree in principle as follows:
(a) The price in Ahold's March 15, 1999 tender offer as set forth in
its Offer to Purchase (the "Offer to Purchase"), and as thereafter extended (the
"Tender Offer"), is $38.25 per share of Preferred Stock (the "Per Share
Amount"). In consideration of the Settlement and release set forth herein and as
a result of the Action, subject to Final Court Approval (as defined below), the
Defendants agree to an increase of the Per Share Amount, such that Ahold will
revise its Tender Offer to increase the Per Share Amount to $40.25 per share of
Preferred Stock, less the total amount awarded as fees and expenses to
Plaintiff's counsel by the Court divided by the total number of outstanding
shares of Preferred Stock (the "New Per Share Amount"). Promptly following
approval of the Settlement by the Delaware Court of Chancery, (1) the SMG-II
Merger Agreement (as defined in the Schedule 14D-9 dated March 15, 1999) shall
be amended (i) to permit either party to the SMG-II Merger Agreement, in the
event that Final Court Approval is not obtained on or prior to November 15,
1999, to extend unilaterally the December 15, 1999 date set forth in Section
8.1(c) of such agreement to a new date thirty (30) days after
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the date of Final Court Approval or a final determination that does not
constitute Final Court Approval (the "New Drop Dead Date"), provided, however,
that the New Drop Dead Date shall not in any event be later than April 17, 2000
unless otherwise mutually agreed by the parties to the SMG-II Merger Agreement,
and (ii) to reflect that, during the time the Settlement remains operative only,
a condition precedent to the obligations of the parties to the SMG-II Merger
Agreement to consummate the Tender Offer shall be obtaining Final Court
Approval, and (2) the Alternative Stock Purchase Agreement (as defined in the
Schedule 14D-9) shall be amended to permit either party to the Alternative Stock
Purchase Agreement, in the event that Final Court Approval is not obtained on or
prior to November 15, 1999, to extend unilaterally the December 15, 1999 date
set forth in Section 8.1(c) of such agreement to the New Drop Dead Date,
provided, however, that the New Drop Dead Date shall not in any event be later
than April 17, 2000 unless otherwise mutually agreed by the parties to the
Alternative Stock Purchase Agreement. Each party to the SMG-II Merger Agreement
shall sign such additional instruments and agreements necessary to give effect
to such amendment, and, in the case of the Alternative Stock Purchase Agreement,
SMG-II shall cause PTK to sign such additional instruments and agreements
necessary to give effect to such amendment. Promptly following Final Court
Approval of
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the Settlement, (1) the SMG-II Merger Agreement shall be amended (i) to reflect
the New Per Share Amount and corresponding reduction in merger consideration to
be received by holders of capital stock of SMG-II pursuant to the SMG-II Merger
Agreement, as set forth in the Settlement as approved, and (ii) to require
SMG-II to obtain the necessary stockholder approval promptly in accordance with
Section 5.4 of the SMG-II Merger Agreement but in no event later than ten (10)
business days after Final Court Approval, (2) the Tender Offer shall be revised
to increase the Per Share Amount to the New Per Share Amount, and (3) the
Company Merger Agreement (as defined in the Schedule 14D-9) shall be amended to
reflect the New Per Share Amount, as necessary. The aggregate amount of merger
consideration allocated to the capital stock of SMG-II pursuant to the SMG-II
Merger Agreement shall be reduced by (1) an amount equal to the increase in the
aggregate price to be paid to the holders of the Preferred Stock pursuant to the
Tender Offer and the Company Merger Agreement and (2) any fees and expenses
awarded to Plaintiff's counsel by the Court. Under no circumstances shall Ahold
be required to increase the amount of overall consideration it is paying in
connection with the transactions contemplated by the SMG-II Merger Agreement,
the Alternative Stock Purchase Agreement, and related documents.
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Ahold, at its sole option, may elect on any date during the period from
March 1, 2000 through April 1, 2000, if prior to such date neither Final Court
Approval nor a final determination that does not constitute Final Court Approval
(an "Adverse Determination") has been received, to cause the SMG-II Merger
Agreement to be amended to reduce the merger consideration to be received by
holders of the capital stock of SMG-II pursuant to the SMG-II Merger Agreement
by $9,781,342 (being the amount equal to the difference between $40.25 per share
and the Per Share Amount multiplied by the number of currently outstanding
shares of Preferred Stock) (the "Escrow Amount"), which Escrow Amount shall be
held in escrow for the benefit of the holders of the Preferred Stock pending
Final Court Approval (less the total amount awarded as fees and expenses to
Plaintiff's counsel by the Court), upon which election (i) Ahold shall be deemed
to have waived on behalf of all parties any requirement under this Settlement of
obtaining Final Court Approval prior to closing the Transaction (or the
Alternative Transaction, if applicable), and (ii) SMG-II shall be required to
obtain the necessary stockholder approval no later than ten (10) business days
after notice of such election by Ahold. Upon such election, Ahold will revise
the Tender Offer and proceed accordingly. Ahold's election to proceed with the
Tender Offer prior to obtaining Final Court Approval shall
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not prejudice or affect Ahold's right to proceed with the Alternative
Transaction if the Minimum Condition is not satisfied. If Ahold makes such
election but Final Court Approval ultimately is not obtained, the Escrow Amount,
(i) if the Tender Offer closes, shall remain in escrow and be available for
satisfaction of an adverse judgment against Defendants, if any, or (ii) if the
Alternative Transaction closes, shall be released to PTK. In the event that
neither Final Court Approval nor an Adverse Determination has been received
prior to April 1, 2000 (whether or not the Minimum Condition has been
satisfied), and Ahold does not make the election described above, then the
Tender Offer shall remain open until the New Drop Dead Date (it being understood
that Ahold shall not waive the condition of Final Court Approval without the
approval of SMG-II, which SMG-II may withhold in its sole discretion) and, if
Final Court Approval is not obtained prior to the New Drop Dead Date (whether or
not the Minimum Condition has been satisfied), the SMG-II Merger Agreement and
the Alternative Stock Purchase Agreement shall terminate with the effect set
forth therein. In the event Ahold makes such election to waive for all parties
any requirement or condition of Final Court Approval prior to closing the
Transaction or the Alternative Transaction, each party to the SMG-II Merger
Agreement and the Alternative Stock Purchase Agreement shall sign amendments or
such additional
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instruments and agreements necessary to give effect to such election.
In the event that an Adverse Determination is received at any time before
termination or closing of the Tender Offer, then the parties shall proceed with
the Transaction and the Alternative Transaction on the terms set forth in the
original SMG-II Merger Agreement or original Alternative Stock Purchase
Agreement; provided, however, that if Ahold has made the election described in
the preceding paragraph and subsequent to such election, but prior to the
closing of the Tender Offer or the Alternative Transaction, an Adverse
Determination is received, then the parties shall proceed with the Transaction
or Alternative Transaction on the terms set forth in the original SMG-II Merger
Agreement and original Alternative Stock Purchase Agreement only if SMG-II
provides notice to Ahold by April 1, 2000 of its election to proceed on those
terms.
Except as expressly set forth in this paragraph 1(a), none of the rights
or obligations of the parties set forth in the SMG-II Merger Agreement, the
Alternative Stock Purchase Agreement, and related documents shall in any way be
changed, modified, abridged or amended, including, without limitation, Ahold's
right to proceed with the Alternative Transaction under the terms of the SMG-II
Merger Agreement and the Alternative Stock Purchase Agreement. It is the
intention of the parties
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that Ahold's participation in this Settlement is primarily to accommodate the
reallocation of the consideration it is offering between the various classes of
securities which make up the capital structure of SMG.
(b) Regardless of whether SMG is legally required to do so, SMG
agrees that it will amend the Schedule 14D-9 dated March 15, 1999 to provide
supplemental disclosures. The parties shall use their reasonable best efforts to
agree upon the substance of the supplemental disclosures.
(c) Reasonably promptly following the execution of this Memorandum
of Understanding by the parties, Defendants shall publicly disclose the terms of
the proposed Settlement set forth herein in a manner deemed reasonable by
Defendants, with prior notice to Plaintiff's counsel.
2. Stipulation of Settlement. The parties to the Action will attempt in
good faith to agree upon and execute an appropriate Stipulation of Settlement
(the "Stipulation") and such other documentation as may be required in order to
obtain Final Court Approval of the Settlement and the dismissal of the Action
upon the terms set forth in this Memorandum of Understanding (collectively, the
"Settlement Documents"). The Stipulation will expressly provide, inter alia,
that:
(a) Plaintiff will petition the Court for certification of a non-opt
out settlement class pursuant to
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Delaware Court of Chancery Rules 23(b)(1) and (b)(2) of all record and
beneficial owners of SMG Preferred Stock from and including March 9, 1999
through and including the consummation of the Transaction, or, if the
Transaction fails to close, the Alternative Transaction, including their
successors in interest, predecessors, legal representatives, trustees, heirs,
assigns or transferees, immediate and remote (the "Class");
(b) Plaintiff will petition the Court for entry of a judgment
dismissing the Action "with prejudice";
(c) Plaintiff will petition the Court for a complete and final
compromise, settlement, discharge and release of all claims, demands, rights,
actions, causes of action, liabilities, damages, losses, obligations, judgments,
suits, matters and issues of any kind or nature whatsoever, whether known or
unknown, contingent or absolute, suspected or unsuspected, disclosed or
undisclosed, hidden or concealed, matured or unmatured, arising under federal,
state or any other law, that have been, could have been, or in the future can or
might be asserted in the Action or in any court, tribunal or proceeding by or on
behalf of any member of the Class (the "Releasing Parties"), whether individual,
class, derivative, representative, legal, equitable or any other type or in any
other capacity, against Defendants or any of their families, parent entities,
affiliates, subsidiaries, predecessors,
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successors or assigns, and each and all of their respective past, present or
future officers, directors, associates, stockholders, controlling persons,
representatives, employees, attorneys, financial or investment advisors,
consultants, accountants, investment bankers, commercial bankers, engineers,
advisors, insurers or agents, heirs, executors, trustees, general or limited
partners or partnerships, personal representatives, estates or administrators,
predecessors, successors and assigns (collectively, the "Released Persons"),
which have arisen, could have arisen, or will arise out of, or which are related
in any manner to, the allegations, facts, events, transactions, acts,
occurrences, statements, representations, misrepresentations, omissions or any
other matter, set forth or otherwise related, directly or indirectly, to the
complaint filed in the Action, the Transaction, the Alternative Transaction,
public filings or statements by Defendants or their representatives in
connection with the Transaction or the Alternative Transaction, or any other
actions of the Defendants relating in any way to the Transaction or the
Alternative Transaction (collectively, the "Settled Claims"); provided, however,
that the Settled Claims shall not include (i) any claims for appraisal pursuant
to 8 Del. C. ss.262 of the Delaware General Corporation Law, or (ii) the right
of any members of the
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Class, Releasing Parties or Released Persons to enforce the terms of the
Settlement;
(d) that Defendants have denied and continue to deny that they have
committed or attempted to commit any violations of law or breaches of duty of
any kind; that Defendants are entering into the Stipulation solely because the
proposed Settlement as described above would eliminate the burden, risk and
expense of further litigation, and is in the best interests of SMG and all of
its shareholders; and
(e) that any of the Defendants shall have the right to withdraw from
the proposed Settlement in the event that (i) any claims related to the
Transaction, the Alternative Transaction, or the subject matter of the Action
(whether direct, derivative or otherwise) are commenced by any member of the
Class against any Released Persons in any court prior to Final Court Approval of
the Settlement, and the court in which such claims are pending denies
Defendants' application to dismiss or stay such action in contemplation of
dismissal or (ii) any of the additional conditions set forth in paragraph 4
below shall not have been satisfied. The parties agree to use their best efforts
to obtain the dismissal or stay in contemplation of dismissal of any action
covered by clause (i) in the foregoing sentence on the terms set forth herein
and further agree that the Defendants shall have the right to
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withdraw from this Memorandum of Understanding if such efforts do not result in
the dismissal or stay in contemplation of dismissal of such an action.
3. Notice and Court Approval. Subject to prior Court approval of the
Stipulation and the form of the Settlement Documents, the parties to the
respective Action will present the Settlement Documents to the Delaware Court of
Chancery for approval as soon as practicable following appropriate notice of the
proposed Settlement to the SMG shareholders as to all claims asserted in the
Action by the named Plaintiff and the holders of SMG's Preferred Stock on whose
behalf the Action was brought, without costs to any party except as provided
herein. SMG shall pay the costs and expenses related to providing notice of the
Settlement to the SMG shareholders. As used herein, "Final Court Approval" of
the Settlement means that the Delaware Court of Chancery has entered an order
approving the Settlement and awarding Plaintiff's attorneys' fees and expenses
and that such order is finally affirmed, without modification of any substantive
right of any party hereto, on appeal or is no longer subject to appeal and the
time for any petition for reargument, appeal or review, by certiorari or
otherwise, has expired, provided that any modification of the order approving
the Settlement with respect to the amount of attorneys' fees and expenses
awarded and/or any additional supplemental disclosure
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required shall not be considered a modification of a substantive right affecting
Final Court Approval. Plaintiff's counsel intend to apply to the Delaware Court
of Chancery for an award of attorneys' fees and reasonable out-of-pocket
disbursements. Subject to the terms and conditions of this Memorandum of
Understanding and the contemplated Stipulation of Settlement, Plaintiff's
counsel will apply for a total award of attorneys' fees and expenses in an
amount not exceeding $1,956,268.40, which amount shall be payable only out of
the amount made available in order to increase in the Tender Offer price as set
forth in paragraph 1(a) above, only after Final Court Approval, and only if the
Tender Offer at the New Per Share Amount closes. The Defendants and other
releasees will not oppose the foregoing application, but reserve their rights to
object to any other or different application for attorneys' fees and expenses.
In the event the Tender Offer at the New Per Share Amount does not close, but
the Alternative Transaction does, the Released Persons shall continue to enjoy
all of the benefits of the Settlement, including the release contemplated
thereby, and Plaintiff's counsel reserves their right to petition the Court of
Chancery for an award of attorneys' fees and expenses, and Defendants reserve
their rights to oppose any such petition; provided, however, that any such award
of attorneys' fees and expenses approved by the Court shall be payable solely by
PTK
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(at the direction of SMG) upon Final Court Approval and closing of the
Alternative Transaction.
4. Other Conditions. The consummation of the Settlement is subject to: (a)
the drafting and execution of the Settlement Documents and the other agreements
necessary to effectuate the terms of the proposed Settlement; (b) Final Court
Approval of the Settlement; (c) dismissal of the Action by the Court with
prejudice and without awarding fees or costs to any party, except as provided
herein; and (d) Ahold closing the Tender Offer and the SMG-II Merger, or the
Alternative Transaction. In the event that the Settlement is not consummated,
this Memorandum of Understanding shall not be deemed to prejudice in any way the
positions of the parties with respect to the Action, shall be subject to Rule
408 of the Delaware Rules of Evidence, and shall not entitle any party to
recover any costs or expenses incurred in connection with the implementation of
this Memorandum of Understanding.
5. Interim Stay of the Action. The parties to the Action agree that except
as expressly provided herein, the Action shall be stayed pending submission of
the proposed Settlement to the Court for its consideration.
6. Miscellaneous. (a) This Memorandum of Understanding may be executed in
counterparts by any of the signatories hereto and as so executed shall
constitute one
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agreement; (b) this Memorandum of Understanding and the Settlement contemplated
by it shall be governed by and construed in accordance with the laws of the
State of Delaware without regard to that State's rules concerning conflict of
laws; (c) this Memorandum of Understanding shall be binding upon and inure to
the benefit of the parties and their respective agents, executors, heirs,
successors and assigns, subject to the conditions set forth herein; (d)
Plaintiff and his counsel represent and warrant that none of the claims or
causes of action asserted in the Action have been assigned, encumbered or in any
manner transferred, in whole or in part; (e) except as provided herein, the
Defendants in the Action shall bear no expenses, costs, damages or fees alleged
or incurred by the Plaintiff, any member of the Class or their respective
attorneys, experts, advisors, agents or representatives; and (f) the provisions
contained in this Memorandum of Understanding shall not be deemed a presumption,
concession or admission by any Defendant in the Action of any breach of duty,
liability, default or wrongdoing as to any facts or claims alleged or asserted
in the Action, or in any other actions or proceedings, and shall not be
interpreted, construed, deemed, invoked, offered or received in evidence or
otherwise used by any person in the Action or in any other action or proceeding
of any nature whatsoever.
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PRICKETT, JONES, ▇▇▇▇▇▇▇ & KRISTOL
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
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▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Attorneys for Plaintiff
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
MORRIS, NICHOLS, ARSHT & ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Attorneys for the SMG Defendants
OF COUNSEL:
SHEARMAN & STERLING
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & FINGER, P.A.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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(▇▇▇) ▇▇▇-▇▇▇▇
Attorneys for Defendant
Ahold Acquisition, Inc.
OF COUNSEL:
WHITE & CASE LLP
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▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
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