THE TRANSFER OF THIS AGREEMENT IS SUBJECT
TO CERTAIN PROVISIONS CONTAINED HEREIN
AND TO RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated as of August 2, 1998 (this
"Agreement"), between Albertson's, Inc., a Delaware corporation ("Issuer"), and
American Stores Company, a Delaware corporation ("Grantee").
WHEREAS, Issuer, Grantee, and a wholly-owned subsidiary of Issuer
(the "Merger Sub") propose to enter into an Agreement and Plan of Merger, to be
dated as of the date hereof (the "Merger Agreement"), pursuant to which Merger
Sub is to merge with and into Issuer, with Grantee continuing as the surviving
corporation and a wholly owned subsidiary of Issuer after such merger, and in
such merger, each share of common stock, par value $1.00 per share, of Grantee
("Common Stock") will be converted to a right to receive shares of common stock,
par value $1.00 per share, of Issuer as provided in the Merger Agreement;
WHEREAS, as an inducement and condition to Grantee's willingness to
enter into the Merger Agreement and in consideration thereof, Issuer is granting
to Grantee, pursuant to the terms and subject to the conditions contained in
this Agreement, an option to purchase 19.9 % of the outstanding shares of Common
Stock; and
WHEREAS, the Board of Directors of Issuer has approved the grant by
Issuer to Grantee of the Option (defined below) pursuant to this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth in this Agreement and in the Merger
Agreement, the parties agree as follows:
1. The Option. Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, pursuant to the terms and subject
to the conditions hereof, up to 48.8 million fully paid and nonassessable shares
of Common Stock at a price of $48 per share (the "Option Price"); provided,
however, that in no event shall the number of shares for which the Option is
exercisable exceed 19.9 % of the shares of Common Stock issued and outstanding
at the time of exercise (without giving effect to the shares of Common Stock
issued or issuable under the Option). The number of shares of Common Stock
purchasable upon exercise of the Option and the Option Price are subject to
adjustment as set forth in this Agreement.
2. Exercise; Closing.
(a) Conditions to Exercise; Termination. Grantee or any other person
that shall become a holder of all or a part of the Option in accordance with the
terms of this Agreement (each such person, including Grantee, being referred to
as "Holder") may exercise the Option, in whole or in part, from time to time,
and prior to the occurrence of an Exercise Termination Event (as defined below),
provided that the Holder shall have delivered a written notice as provided in
Section 2(d) within 120 days of the occurrence of a Triggering Event (as defined
in Section 2(b)). The right to exercise the Option shall terminate upon either
(i) the occurrence of the Effective Time (as defined in the Merger Agreement) or
(ii) (A) if a Notice Date (as defined in Section 2(d) hereof) has not previously
occurred, the close of business on the earlier of (x) the day that is 120 days
after the date of a Triggering Event, (y) the date upon which the Merger
Agreement is terminated if no Termination Fee could be payable by Issuer
pursuant to the terms of the Merger Agreement upon the occurrence of certain
events or the passage of time, and (z) 270 days following the date upon which
the Merger Agreement is terminated, and (B) if the Notice Date has previously
occurred, 120 days after the Notice Date (the events in (i) or (ii) being
referred to as "Exercise Termination Events".)
(b) Triggering Event. A "Triggering Event" shall have occurred at
such time at which the Grantee becomes entitled to receive from Issuer a
Termination Fee pursuant to Section 8.2 of the Merger Agreement.
(c) Notice of Trigger Event by Issuer. Issuer shall notify Grantee
promptly in writing of the occurrence of any Triggering Event (it being
understood that the giving of the notice by Issuer shall not be a condition to
the right of Holder to exercise the option).
(d) Notice of Exercise. If Holder shall be entitled to and desires
to exercise the Option, in whole or in part, it shall send to Issuer a written
notice (any date on which such notice is given, in accordance with Section 15
hereof, is referred to as a "Notice Date") specifying (i) the total number of
shares that Holder will purchase pursuant to the exercise and (ii) a place and
date (a "Closing Date") not earlier than three business days nor later than 60
business days from the Notice Date for the closing of the purchase (a
"Closing"); provided, that if a filing or any approval is required under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), or prior notification to or prior approval from any regulatory authority
is required under any other law, statute, rule or regulation (including
applicable rules and regulations of national securities exchanges) in connection
with such purchase, Holder or Issuer, as required, promptly after the Notice
Date, shall file all necessary notices and applications for approval and shall
expeditiously process the same and the period of time referred to in clause (ii)
shall commence on the date on which all required notification and waiting
periods, if any, shall have expired or been terminated and all required
approvals, if any,
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shall have been obtained. Any exercise of the Option shall be
deemed to occur on the date of the Notice Date relating thereto. Each of Holder
and Issuer agrees to use its reasonable best efforts to cooperate with and
provide information to the other, for the purpose of any required notice or
application for approval.
(e) Payment of Purchase Price; Delivery of Common Stock. (i) At each
Closing, Holder shall pay to Issuer the aggregate purchase price for the shares
of Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by a wire transfer to a bank account designated by Issuer;
provided, that failure or refusal of Issuer to designate a bank account shall
not preclude Holder from exercising the Option, in whole or in part.
(ii) At each Closing, simultaneously with the payment of the
aggregate purchase price by Holder, Issuer shall deliver to Holder a certificate
or certificates representing the number of shares of Common Stock purchased by
Holder and, if the Option shall be exercised in part only, a new Agreement
providing for an Option evidencing the rights of Holder to purchase the balance
(as adjusted pursuant to Section l(b)) of the shares then purchasable hereunder
and the Holder shall deliver this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable laws or the provisions of this Agreement.
(iii) Notwithstanding anything to the contrary contained in
paragraphs (i) and (ii) of this Section 2(e), Holder shall have the right (a
"Cashless Exercise Right") to direct the Issuer, in the written notice of
exercise referred to in Section 2(d), to reduce the number of shares of Common
Stock required to be delivered by Issuer to Holder at any Closing by such number
of shares of Common Stock that have an aggregate Market/Offer Price (as defined
in Section 9(a)) equal to the aggregate purchase price payable at such Closing
(but for this paragraph (iii)), or any portion thereof, in lieu of Holder paying
to the Issuer at such Closing such aggregate purchase price or portion thereof,
as the case may be. Any exercise of the Option in which, and to the extent to
which, Holder exercises its Cashless Exercise Right pursuant to this paragraph
(iii) shall be referred to as a "Cashless Exercise."
(f) Restrictive Legend. Certificates for Common Stock delivered at a
Closing may be endorsed with a restrictive legend that shall read substantially
as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and Issuer, a copy of which agreement is on file at the
principal office of Issuer, and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of the aforementioned agreement
will be mailed to the holder without charge promptly after receipt by
Issuer of a written request therefor."
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It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "Securities Act"), in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if Holder shall have delivered to Issuer a copy of a letter from the
staff of the Securities and Exchange Commission, or a written opinion of
counsel, in form and substance reasonably satisfactory to Issuer, to the effect
that such legend is not required for purposes of the Securities Act; (ii) the
reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) both are satisfied. In
addition, the certificates shall bear any other legend as may be required by
applicable law.
(g) Ownership of Record; Tender of Purchase Price; Expenses. Upon
the giving by Holder to Issuer of the written notice of exercise referred to in
Section 2(d) and, except to the extent such notice relates to a Cashless
Exercise, the tender of the applicable purchase price in immediately available
funds, Holder shall be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the stock transfer books
of Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not have been actually delivered to Holder. Issuer shall pay
all expenses, and any and all United States federal, state and local taxes and
other charges that may be payable in connection with the preparation, issuance
and delivery of stock certificates under this Section 2 in the name of Holder or
its assignee, transferee or designee.
3. Covenants of Issuer. In addition to its other agreements and
covenants herein, Issuer agrees:
(a) Shares Reserved for Issuance. To maintain, free from preemptive
rights, sufficient authorized but unissued or treasury shares of Common Stock so
that the Option may be fully exercised without additional authorization of
Common Stock after giving effect to all other options, warrants, convertible
securities and other rights of third parties to purchase shares of Common Stock;
(b) No Avoidance. Not to avoid or seek to avoid (whether by charter
amendment or through reorganization, consolidation, merger, issuance of rights,
dissolution or sale of assets, or by any other voluntary act) the observance or
performance of any of the covenants, agreements or conditions to be observed or
performed hereunder by Issuer and not to take any action which would cause any
of its representations or warranties not to be true; and
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(c) Further Assurances. Promptly after the date hereof to take all
actions as may from time to time be required (including (i) complying with all
applicable premerger notification, reporting and waiting period requirements
under the HSR Act and (ii) in the event that any other prior approval of or
notice to any regulatory authority is necessary under any applicable federal,
state or local law before the Option may be exercised, cooperating fully with
Holder in preparing and processing the required applications or notices) in
order to permit Holder to exercise the Option and purchase shares of Common
Stock pursuant to such exercise.
4. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Holder that Issuer has all requisite corporate power
and authority and has taken all corporate action necessary to authorize,
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby; and that this Agreement has
been duly and validly authorized, executed and delivered by Issuer. Issuer
hereby further represents and warrants to Holder that it has taken all necessary
corporate action to authorize and reserve for issuance upon exercise of the
Option the number of shares of Common Stock equal to the maximum number of
shares of Common Stock at any time or from time to time issuable upon exercise
of the Option and that all shares of Common Stock, upon issuance pursuant to the
Option, will be delivered free and clear of all claims, liens, encumbrances, and
security interests (other than those created by this Agreement) and not subject
to any preemptive rights. The execution and delivery of this Agreement, the
grant of the Option hereunder and the exercise in whole or in part of the Option
in accordance with this Agreement, will not (i) result in the occurrence of any
"Distribution Date," "Stock Acquisition Date" or "Triggering Event" under the
Alphabet Rights Agreement (as defined in the Merger Agreement) of Abacus, (ii)
permit any Person to exercise any rights issued under any rights agreements of
Abacus, or (iii) cause the separation of any such rights from the shares of
Common Stock to which they are attached or such rights becoming exercisable.
Issuer has taken all action necessary to make inapplicable to Grantee any state
takeover, business combination, control share or other similar statute and any
charter provisions which would otherwise be applicable to Grantee or any
transaction involving Issuer and Grantee by reason of the grant of the Option,
the acquisition of beneficial ownership of shares of Common Stock as a result of
the grant of the Option, or the acquisition of shares of Common Stock upon
exercise of the Option, except for statutes or provisions which by their terms
cannot be waived or rendered inapplicable by any action of Issuer or the Board
of Directors of Issuer.
5. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that Grantee has all requisite corporate power
and authority and has taken all corporate action necessary in order to
authorize, execute, deliver and perform its obligations under this Agreement and
to consummate the transactions contemplated hereby. This Agreement has been duly
and validly authorized, executed and delivered by Grantee. Grantee represents
and warrants to Issuer that any
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shares of Common Stock acquired upon exercise of the Option will be acquired for
Grantee's own account, and will not be, and the Option is not being, acquired by
Grantee with a view to the distribution thereof in violation of any applicable
provision of the Securities Act. Grantee has such knowledge and experience in
business and financial matters as to be capable of utilizing the information
which is available to Grantee to evaluate the merits and risks of an investment
by Grantee in the Common Stock and Grantee is able to bear the economic risks of
any investment in the shares of Common Stock which Grantee may acquire upon
exercise of the Option.
6. Exchange; Replacement. This Agreement and the Option are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase on the same terms and subject to the same conditions as set
forth herein in the aggregate the same number of shares of Common Stock
purchasable at such time hereunder, subject to corresponding adjustments in the
number of shares of Common Stock purchasable upon exercise so that the aggregate
number of such shares under all Agreements issued in respect of this Agreement
shall not exceed 19.9 % of the outstanding shares of Common Stock of the Issuer
(without giving effect to shares of Common Stock issued or issuable pursuant to
the Option). Unless the context shall require otherwise, the terms "Agreement"
and "Option" as used in this Agreement include any Agreements and related
options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon (i) receipt by Issuer of reasonably satisfactory evidence of the
loss, theft, destruction, or mutilation of this Agreement, (ii) receipt by
Issuer of reasonably satisfactory indemnification in the case of loss, theft or
destruction and (iii) surrender and cancellation of this Agreement in the case
of mutilation, Issuer will execute and deliver a new Agreement of like tenor and
date. Any new Agreement executed and delivered shall constitute an additional
contractual obligation on the part of Issuer, whether or not the Agreement so
lost, stolen, destroyed or mutilated shall at any time be enforceable by any
person other than the holder of the new Agreement.
7. Adjustments. The total number of shares of Common Stock
purchasable upon the exercise of the Option and the Option Price shall be
subject to adjustment from time to time as follows:
In the event of any change in, or distribution in respect of,
the outstanding shares of Common Stock by reason of stock dividends, split-ups,
mergers, recapitalizations, combinations, subdivisions, conversions, exchanges
of shares or the like, the type (including, in the event of any Major
Transaction described in Section 9(d) hereof in which Issuer is not the
surviving or continuing corporation, to provide that the Option shall be
exercisable for shares of common stock of the surviving or continuing
corporation in such Major Transaction) and number of shares of Common Stock
purchasable upon exercise of the Option and the Option Price shall be
appropriately
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adjusted in such manner as shall fully preserve the economic
benefits contemplated hereby, and proper provision shall be made in the
agreements governing any such transactions to provide for such proper adjustment
and the full satisfaction of Issuer's obligation hereunder.
8. Registration. At any time after a Triggering Event occurs and
prior to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered in the written notice of exercise of the Option provided for in
Section 2(d), and, with respect to the first demand registration as to which the
Grantee exercises its demand rights under this Section 8, delivered no later
than 90 days following such Triggering Event, as promptly as practicable
prepare, file and keep current a shelf registration statement under the
Securities Act covering any or all shares issued and issuable pursuant to the
Option and shall use its reasonable best efforts to cause such registration
statement to become effective and remain current in order to permit the sale or
other disposition of any shares of Common Stock issued upon total or partial
exercise of the Option ("Option Shares") in accordance with any plan of
disposition requested by Grantee; provided, however, that Issuer may postpone
filing a registration statement relating to a registration request by Grantee
under this Section 8 for a period of time (not in excess of 90 days) if in
Grantee's judgment such filing would require the disclosure of material
information that Issuer has a bona fide business purpose for preserving as
confidential. Issuer will use its reasonable best efforts to cause such
registration statement first to become effective and then to remain effective
for 365 days after the day the registration statement first becomes effective or
such shorter time as is reasonably appropriate to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations. In
connection with any such registration, Issuer and Holder shall provide each
other with representations, warranties, indemnities and other agreements
customarily given in connection with such registrations. To the extent requested
by Holder in connection with such registration, Issuer) shall (x) become a party
to any underwriting agreement relating to the sale of such shares, but only to
the extent of obligating Issuer in respect of representations, warranties,
indemnities, contribution and other agreements (in each case reasonably
acceptable to Issuer) customarily made by issuers in such underwriting
agreements, and (y) use its reasonable best efforts to take all further actions
which shall be reasonably necessary to effect such registration and sale
(including participating in road-show presentations and causing to be delivered
customary certificates, opinions of counsel and "comfort letters").
Notwithstanding anything to the contrary contained herein, in no event shall
Issuer be obligated to effect more than two registrations pursuant to this
Section 8 by reason of the fact that there shall be more than one Grantee as a
result of any assignment or division of this Agreement. Upon the effectiveness
of a registration statement demanded pursuant to this Section 8, the Holder of
the Option Shares that are the subject of such registration may not thereafter
require the Issuer to repurchase such Option Shares so long as such registration
statement remains effective as required hereby.
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9. Repurchase of Option and/or Shares.
(a) Repurchase; Repurchase Price. Upon the occurrence of a
Triggering Event prior to an Exercise Termination Event, (i) at the request of
Holder, delivered in writing within 120 days of such occurrence (or such later
period as provided in Section 2(d) with respect to any required notice or
application or in Section 10), Issuer shall repurchase the Option from Holder,
in whole or in part, at a price (the "Option Repurchase Price") equal to the
number of shares of Common Stock then purchasable upon exercise of the Option
(or such lesser number of shares as may be designated in the Repurchase Notice
(as defined in Section 9(b))) multiplied by the amount by which the Market/Offer
Price (as defined below) exceeds the Option Price or (ii) at the request of any
owner of Option Shares (an "Owner") delivered in writing within 120 days of such
occurrence (or such later period as provided in Section 2(d) with respect to any
required notice or application or in Section 10), Issuer shall repurchase such
number of Option Shares from such Owner as such Owner shall designate in the
Repurchase Notice at a price (the "Option Share Repurchase Price") equal to the
number of shares designated multiplied by the Market/Offer Price. The term
"Market/Offer Price" shall mean the highest of (x) the price per share of Common
Stock at which a tender or exchange offer for Common Stock either has been
consummated, or at which a Person has publicly announced its intention to
commence a tender or exchange offer, after the date of this Agreement and prior
to the delivery of the Repurchase Notice, and which offer either has been
consummated and not withdrawn or terminated as of the date payment of the
Repurchase Price is made, or has been publicly announced and such intention to
make a tender or exchange offer has not been withdrawn as of the date payment of
the Repurchase Price is made, (y) the price per share of Common Stock to be paid
by any third party pursuant to an agreement with Issuer for a merger, share
exchange, consolidation or reorganization entered into after the date hereof and
on or prior to the delivery of the Repurchase Notice and (z) the average closing
price for shares of Common Stock on the New York Stock Exchange (the "NYSE")
(or, if the Common Stock is not then listed on the NYSE, any other national
securities exchange or automated quotation system on which the Common Stock is
then listed or quoted) for the twenty consecutive trading days immediately
preceding the delivery of the Repurchase Notice. In the event that a tender or
exchange offer is made for the Common Stock or an agreement is entered into for
a merger, share exchange, consolidation or reorganization involving
consideration other than cash, the value of the securities or other property
issuable or deliverable in exchange for the Common Stock shall be determined in
good faith by a nationally recognized investment banking firm mutually selected
by Issuer and Holder or Owner, as the case may be.
(b) Method of Repurchase. Holder or Owner, as the case may be, may
exercise its right to require Issuer to repurchase the Option, in whole or in
part, and/or any Option Shares then owned by Holder or Owner pursuant to this
Section 9 by surrendering for this purpose to Issuer, at its principal office,
this Agreement or
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certificates for Option Shares, as applicable, accompanied by
a written notice or notices stating that Holder or Owner elects to require
Issuer to repurchase the Option and/or such Option Shares in accordance with the
provisions of this Section 9 (each such notice, a "Repurchase Notice"). Within
four business days after the surrender of the Agreement for the Option and/or
certificates representing Option Shares and the receipt of the Repurchase
Notice, Issuer shall deliver or cause to be delivered to Holder or Owner of
Option Shares, as the case may be, the applicable Option Repurchase Price and/or
the Option Share Repurchase Price or, in either case, the portion that Issuer is
not then prohibited under applicable law and regulation from so delivering in
immediately available funds by a wire transfer to a bank account designated by
grantee. In the event that the Repurchase Notice shall request the repurchase of
the Option in part, Issuer shall deliver with the Option Repurchase Price a new
Agreement evidencing the right of the Holder to purchase that number of shares
of Common Stock purchasable pursuant to the Option at the time of delivery of
the Repurchase Notice minus the number of shares of Common Stock represented by
that portion of the Option then being repurchased.
(c) Effect of Statutory or Regulatory Restraints on Repurchase. To
the extent that, upon or following the delivery of a Repurchase Notice, Issuer
is prohibited under applicable law or regulation from repurchasing the Option
(or a portion thereof) and/or any Option Shares subject to such Repurchase
Notice (and Issuer hereby undertakes to use its reasonable best efforts to
obtain all required regulatory and legal approvals and to file any required
notices as promptly as practicable in order to accomplish this repurchase),
Issuer shall promptly so notify Holder or Owner, as the case may be, in writing
and thereafter deliver or cause to be delivered, from time to time, to Holder or
Owner, as the case may be, the portion of the Option Repurchase Price and the
Option Share Repurchase Price that Issuer is no longer prohibited from
delivering, within four business days after the date on which it is no longer so
prohibited; provided, however, that upon notification by Issuer in writing of
this prohibition, Holder or Owner, as the case may be, may, within 5 days of
receipt of this notification from Issuer, revoke in writing its Repurchase
Notice, whether in whole or to the extent of the prohibition, whereupon, in the
latter case, Issuer shall promptly (i) deliver to Holder or Owner, as the case
may be, that portion of the Option Repurchase Price and/or the Option Share
Repurchase Price that Issuer is not prohibited from delivering; and (ii) (a)
deliver to Holder with respect to the Option, a new Agreement evidencing the
right of Holder to purchase that number of shares of Common Stock for which the
surrendered Agreement was exercisable at the time of delivery of the Repurchase
Notice less the number of shares as to which the Option Repurchase Price has
theretofore been delivered to Holder, and/or (b) deliver to the owner of Option
Shares, with respect to its Option Shares, a certificate for the Option Shares
as to which the Option Share Repurchase Price has not theretofore been delivered
to such owner. Notwithstanding anything to the contrary in this Agreement,
including, without limitation, the time limitations on the exercise of the
Option, Holder may exercise the Option at least until 120 days after such date
upon which Issuer is no longer prohibited from delivering all of the Option
Repurchase Price.
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(d) Major Transactions. Issuer hereby agrees that, prior to the
occurrence of an Exercise Termination Event, Issuer shall not enter into or
agree to enter into any agreement for a Major Transaction (defined below) unless
the other party or parties thereto agree to assume in writing Issuer's
obligations under this Agreement. "Major Transaction" shall mean any merger or
consolidation involving the Issuer and any transaction involving a sale,
transfer or other disposition of a majority of the assets or shares of capital
stock of the Issuer.
10. Extension of Exercise Periods. The 120 and 270 day periods for
exercise of certain rights under Sections 2 and 9 shall be extended in each such
case at the request of Holder or Owner to the extent necessary to avoid
liability by a Holder or Owner under Section 16(b) of the Securities Exchange
Act of 1934, as amended, by reason of such exercise.
11. Assignment. Neither party hereto may assign any of its rights or
obligations under this Agreement or the Option to any other person without the
express written consent of the other party except that Holder or Owner may
assign its rights in whole or in part to any of its affiliates and, in the event
that a Triggering Event shall have occurred prior to the occurrence of an
Exercise Termination Event, Holder or Owner may within 90 days following such
Triggering Event assign the Option or any of its other rights hereunder, in
whole or in part to one or more third parties, provided that the affiliate and
any such third party shall execute this Agreement and agree to become subject to
its terms. Any attempted assignment in contravention of the preceding sentence
shall be null and void.
12. Filings; Other Actions. Each party hereto will use its
reasonable best efforts to make all filings with, and to obtain consents of, all
third parties and govern mental authorities necessary for the consummation of
the transactions contemplated by this Agreement.
13. Specific Performance. The parties acknowledge that damages would
be an inadequate remedy for a breach of this Agreement by either party and that
the obligations of the parties shall be specifically enforceable through
injunctive or other equitable relief.
14. Severability; Etc. If any term, provision, covenant, or
restriction contained in this Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants, and
restrictions contained in this Agreement shall remain in full force and effect,
and shall in no way be affected, impaired, or invalidated. If for any reason a
court or regulatory agency determines that Holder is not permitted to acquire,
or Issuer is not permitted to repurchase pursuant to Section 9, any portion of
the Option or the full number of shares of Common Stock provided in Section l(a)
hereof (as adjusted
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pursuant Section 1(b) and 7 hereof), it is the express intention of the parties
to allow Holder to acquire or to require Issuer to repurchase such lesser
portion of the Option or number of shares as may be permissible, without any
amendment or modification of this Agreement.
15. Notices. All notices, requests, instructions, or other documents
to be given hereunder shall be furnished in accordance with Section 9.2 of the
Merger Agreement.
16. Expenses. Except as otherwise expressly provided in this
Agreement or in the Merger Agreement, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring the expense, including fees and
expenses of its own financial consultants, investment bankers, accountants, and
counsel.
17. Entire Agreement, Etc. This Agreement and Merger Agreement
constitute the entire agreement, and supersede all other prior agreements,
understandings, representations and warranties, both written and oral, between
the parties, with respect to the subject matter of this Agreement. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties, and their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
18. Limitation on Profit. (a) Notwithstanding any other provision of
this Agreement, in no event shall the Total Profit (as hereinafter defined) plus
any Liquidation Amounts (as defined below) exceed in the aggregate $360 million
and, if it otherwise would exceed this amount, the Grantee, at its sole
election, shall either (i) reduce the number of shares of Common Stock subject
to this Option, (ii) deliver to the Issuer for cancellation Option Shares
previously purchased by Grantee or any other Holder or Owner, (iii) pay to the
Issuer cash or refund in cash Liquidation Amounts previously paid or reduce or
waive the amount of any Liquidation Amount payable pursuant to Section 8.2, or
(iv) any combination thereof, so that Grantee's realized Total Profit, when
aggregated with any Liquidation Amounts so paid or payable to Grantee, shall not
exceed $360 million after taking into account the foregoing actions.
As used herein the term "Liquidation Amounts" means the aggregate
amount of all Fees and Expenses, and Termination Fees, payable or paid to
Grantee and its assigns pursuant to Section 8.2 of the Merger Agreement (and not
repaid or refunded to the Issuer pursuant to Section 18 or otherwise).
(b) Notwithstanding any other provision of this Agreement, the
Option may not be exercised for a number of shares as would, as of the date of
exercise, result in
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a Notional Total Profit (as defined below) which, together with any Liquidation
Amount theretofore paid or then payable to Grantee (and not repaid or refunded
to the Issuer pursuant to Section 18 or otherwise), would exceed $360 million
provided, that nothing in this sentence shall restrict any exercise of the
Option permitted hereby on any subsequent date.
(c) As used in this Agreement, the term "Total Profit" shall mean
the aggregate amount (before taxes) of the following: (i) (x) the amount
received by Grantee, any other Holder and any Owner pursuant to Issuer's
repurchase of the Option (or any portion thereof) or any Option Shares pursuant
to Section 9, less, in the case of any repurchase of Option Shares, (y) the
Grantee's, any other Holder's and any Owner's purchase price for such Option
Shares, as the case may be, (ii) (x) the net cash amounts (and the fair market
value of any other consideration) received by Grantee, any other Holder and any
Owner pursuant to the sale of Option Shares (or any other securities into which
such Option Shares are converted or exchanged) to any unaffiliated party, less
(y) the Grantee's (or any other Holder's or Owner's) purchase price of such
Option Shares, and (iii) the net cash amounts (and the fair market value of any
other consideration) received by Grantee (or any other Holder) on the transfer
of the Option (or any portion thereof) to any unaffiliated party. In the case of
clauses (ii)(x) and (iii) above, the Grantee and each Holder and Owner agrees to
furnish as promptly as reasonably practicable after any disposition of all or a
portion of the Option or Option Shares a complete and correct statement,
certified by a responsible executive officer or partner of Grantee, Holder or
Owner, as applicable, of the net cash amounts (and the fair market value of any
other consideration) received in connection with any sale or transfer of the
Option or Option Shares.
(d) As used in this Agreement, the term "Notional Total Profit" with
respect to any number of shares as to which Grantee and any other Holder may
propose to exercise the Option shall be the Total Profit determined as of the
date of such proposal (taking into account the provision of Section 18(a)
hereof) assuming that the Option were exercised on such date for such number of
shares and assuming that such shares, together with all other Option Shares held
by Grantee and any other Holders and Owners and their respective affiliates as
of such date were sold for cash at the closing market price for the Common Stock
on the New York Stock Exchange Composite Transaction Tape as of the close of
business on the preceding trading day (less customary brokerage commissions).
19. Captions. The section, paragraph and other captions in this
Agreement are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions of this Agreement.
20. Counterparts. This Agreement may be executed in one or more
counterparts, and by both parties in separate counterparts, each of which when
exercised
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shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
21. Restrictions on Certain Actions; Covenants of Grantee. From and
after the date of exercise of the Option in whole or part, and for as long as
Grantee owns shares of Common Stock acquired pursuant to the exercise of the
Option:
(a) Without the prior consent of the Board of Directors of Issuer
specifically expressed in a resolution, Grantee will not, and will not permit
any of its Affiliates (as defined in Section 23) to:
(i)acquire or agree, offer, seek or propose to acquire,
ownership (including, but not limited to, beneficial
ownership as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) of more than 20% of any
class of Voting Securities (as defined in Section 23), or
any rights or options to acquire such ownership (including
from a third party);
(ii) propose a merger, consolidation or similar transaction
involving the Issuer;
(iii) offer, seek or propose to purchase, lease or otherwise
acquire all or a substantial portion of the assets of the
Issuer;
(iv) seek or propose to influence or control the management or
policies of the Issuer or to obtain representation on the
Issuer's Board of Directors, or solicit or participate in
the solicitation of any proxies or consents with respect to
the securities of the Issuer;
(v)enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of
the foregoing; or
(vi) seek or request permission to do any of the foregoing or
seek any permission to make any public announcement with
respect to any of the foregoing.
The provisions of this Section 21 shall not apply to actions taken
pursuant to the Merger Agreement; and
(b) Grantee may not sell, transfer any beneficial interest in,
pledge, hypothecate or otherwise dispose of any Voting Securities at any time
except as follows:
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(i)pursuant to a tender offer, exchange offer, merger or
consolidation of the Issuer, or in connection with a sale
of all or substantially all of the Issuer's assets; or
(ii) pursuant to a registered public offering under Section 8;
or
(iii) in compliance with Rule 144 of the General Rules and
Regulations under the Securities Act (or any similar
successor rule); and
(c) (i) Grantee agrees to be present in person or to be represented
by proxy at all stockholder meetings of Issuer so that all shares of Voting
Securities beneficially owned by it or its Affiliates may be counted for the
purpose of determining the presence of a quorum at such meetings.
(ii) Grantee agrees to vote or cause to be voted all Voting
Securities beneficially owned by it or its Affiliates proportionately with the
votes cast by all other stockholders present and voting.
(iii) The provision of this Section 21 shall terminate at such
time as (x) Grantee beneficially owns more than 50% of the outstanding Common
Stock of Issuer or (y) the Option granted hereby expires without having been
exercised in whole or part.
22. Governing Law. This Agreement shall be governed by and continued
in accordance with the internal law of the State of Delaware
23. Definitions. For the purposes of this Agreement the following
terms shall have the meanings specified with respect thereto below:
"Affiliate" shall mean, as to any Person, any other Person
which directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of management or policies, whether through ownership or
securities or partnership or other ownership interest, by contract or
otherwise).
"Voting Securities" means the shares of Common Stock,
preferred stock and any other securities of Issuer entitled to vote generally
for the election of directors or any other securities (including, without
limitation, rights and options), convertible into, exchangeable into or
exercisable for, any of the foregoing (whether or not presently exercisable,
convertible or exchangeable).
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"Person" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated organization,
entity or group (as defined in the Exchange Act).
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first written above.
XXXXXXXXX'X, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Title: Executive Vice President;
Store Development
AMERICAN STORES COMPANY
By: /s/ Xxxxxx X. Xxxx
Name: Xxxxxx X. Xxxx
Title: Chief Executive Officer
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