-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KE5MUshwuOw9TwRtQdh/cTGm2TYLJaCDCtr/S6GvDD4J5L8kB8NxZ7SvfsYmUxeN ZeJMhlFRkSYew//Kup+hLA== 0000950130-99-001445.txt : 19990316 0000950130-99-001445.hdr.sgml : 19990316 ACCESSION NUMBER: 0000950130-99-001445 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 19990315 GROUP MEMBERS: AHOLD ACQUISITION, INC. GROUP MEMBERS: AHOLD U.S.A., INC. GROUP MEMBERS: CROESUS, INC. GROUP MEMBERS: ROYAL AHOLD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SUPERMARKETS GENERAL HOLDINGS CORP CENTRAL INDEX KEY: 0000821139 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 133408704 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-41218 FILM NUMBER: 99565366 BUSINESS ADDRESS: STREET 1: 301 BLAIR RD STREET 2: P.O. BOX 5301 CITY: WOODBRIDGE STATE: NJ ZIP: 07095-0915 BUSINESS PHONE: 9084993000 MAIL ADDRESS: STREET 1: 301 BLAIR RD STREET 2: P.O. BOX 5301 CITY: WOODBRIDGE STATE: NJ ZIP: 07095-0915 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ROYAL AHOLD CENTRAL INDEX KEY: 0000869425 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 000000000 FISCAL YEAR END: 1227 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: ALBERT HEIJNWEG 1 STREET 2: P O BOX 33 CITY: 1500 EA ZAANDAM THE STATE: P7 MAIL ADDRESS: STREET 1: C/O WHITE & CASE LLP STREET 2: 1155 AVENUE OF THE AMERICUS CITY: NEW YORK STATE: NY ZIP: 10036-2787 SC 14D1 1 SCHEDULE 14D-1 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- SCHEDULE 14D-1 Tender Offer Statement Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934 --------------- Supermarkets General Holdings Corporation (Name of Subject Company) --------------- Koninklijke Ahold N.V. (Royal Ahold) Croesus, Inc. Ahold U.S.A., Inc. Ahold Acquisition, Inc. (Bidders) --------------- $3.52 Cumulative Exchangeable Redeemable Preferred Stock, par value 0.01 per share (Title of Class of Securities) --------------- 86844620 (CUSIP Number of Class of Securities) --------------- Mr. Paul P.J. Butzelaar Koninklijke Ahold N.V. Albert Heijnweg 1 1507 EH Zaandam, The Netherlands 011-31-75-659-5671 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Bidders) --------------- Copy to: John M. Reiss, Esq. White & Case LLP 1155 Avenue of the Americas New York, New York 10036 (212) 819-8200 CALCULATION OF FILING FEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
Amount of Transaction Filing Valuation* Fee** - ------------------------------------------------------------------------------ $187,068,165.75 $37,413.63
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- * For purposes of calculating the filing fee only. This calculation assumes the purchase of 4,890,671 Shares at a price of U.S. $38.25 net per Share in cash. ** The amount of the filing fee, calculated in accordance with Rule 0-11 under the Securities Exchange Act of 1934, as amended, equals 1/50 of one percent of the aggregate of the Transaction Value. [_]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or Schedule and the date of its filing. Amount Previously Paid: _____________ Filing Party: _______________________ Form or Registration No.: ___________ Date Filed: _________________________ - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SCHEDULE 14D-1 CUSIP No. 86844620
1. NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Koninklijke Ahold N.V. - ---------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [X] - ---------------------------------------------------------------------- 3. SEC USE ONLY - ---------------------------------------------------------------------- 4. SOURCE OF FUNDS N/A - ---------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) [_] - ---------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION The Netherlands - ---------------------------------------------------------------------- 7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 0 - ---------------------------------------------------------------------- 8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [_] - ---------------------------------------------------------------------- 9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 0.0% - ---------------------------------------------------------------------- 10. TYPE OF REPORTING PERSON CO
1 SCHEDULE 14D-1 CUSIP No. 86844620
1. NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Croesus, Inc. - ---------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [X] - ---------------------------------------------------------------------- 3. SEC USE ONLY - ---------------------------------------------------------------------- 4. SOURCE OF FUNDS BK - ---------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) [_] - ---------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION State of Delaware - ---------------------------------------------------------------------- 7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 0 - ---------------------------------------------------------------------- 8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [_] - ---------------------------------------------------------------------- 9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 0.0% - ---------------------------------------------------------------------- 10. TYPE OF REPORTING PERSON CO
2 SCHEDULE 14D-1 CUSIP No. 86844620
1. NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Ahold U.S.A., Inc. - ------------------------------------------------------------------ 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [X] - ------------------------------------------------------------------ 3. SEC USE ONLY - ------------------------------------------------------------------ 4. SOURCE OF FUNDS AF - ------------------------------------------------------------------ 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) [_] - ------------------------------------------------------------------ 6. CITIZENSHIP OR PLACE OF ORGANIZATION State of Delaware - ------------------------------------------------------------------ 7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 0 - ------------------------------------------------------------------ 8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [_] - ------------------------------------------------------------------ 9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 0.0% - ------------------------------------------------------------------ 10. TYPE OF REPORTING PERSON CO
3 SCHEDULE 14D-1 CUSIP No. 86844620
1. NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Ahold Acquisition, Inc. - ------------------------------------------------------------------ 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [X] - ------------------------------------------------------------------ 3. SEC USE ONLY - ------------------------------------------------------------------ 4. SOURCE OF FUNDS AF - ------------------------------------------------------------------ 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) [_] - ------------------------------------------------------------------ 6. CITIZENSHIP OR PLACE OF ORGANIZATION State of Delaware - ------------------------------------------------------------------ 7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 0 - ------------------------------------------------------------------ 8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [_] - ------------------------------------------------------------------ 9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 0.0% - ------------------------------------------------------------------ 10. TYPE OF REPORTING PERSON CO
4 Item 1. Security and Subject Company. (a) The name of the subject company is Supermarkets General Holdings Corporation, a Delaware corporation (the "Company"). The address of its principal executive offices is 200 Milik Street, Carteret, New Jersey 07008. (b) This Statement relates to the offer by Ahold Acquisition, Inc., a Delaware corporation (the "Purchaser"), to purchase all of the issued and outstanding $3.52 cumulative exchangeable redeemable preferred stock, par value $0.01 per share, of the Company (the "Shares") at a price of $38.25 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated March 15, 1999 (the "Offer to Purchase") and in the related Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively. Information concerning the number of outstanding Shares and consideration being offered therefor is set forth in the Introduction of the Offer to Purchase and is incorporated herein by reference. (c) The information concerning the principal markets in which the Shares are traded and the market quotations for the Shares for each quarterly period during the past two years set forth in Section 6--"Price Range of Shares; Dividends" of the Offer to Purchase is incorporated herein by reference. Item 2. Identity and Background. (a)-(d), (g) This Statement is being filed by the Purchaser, Ahold U.S.A., Inc., a Delaware corporation ("Ahold U.S.A."), Croesus, Inc., a Delaware corporation ("Croesus") and Koninklijke Ahold N.V. (also referred to as Royal Ahold), a corporation organized under the laws of The Netherlands ("Parent"). The Purchaser is a direct wholly-owned subsidiary of Ahold U.S.A. and a subsidiary of each of Croesus and Parent. Information concerning the principal business and the address of the principal offices of the Purchaser, Ahold U.S.A., Croesus and Parent is set forth in Section 8--"Certain Information Concerning the Purchaser, Ahold U.S.A., Croesus and Parent" of the Offer to Purchase and is incorporated herein by reference. (e), (f) During the last five years, none of Parent, Croesus, Ahold U.S.A. or the Purchaser, or to the best knowledge of Parent, Croesus, Ahold U.S.A. and the Purchaser, none of the members of the Supervisory Board or the Corporate Executive Board or the executive officers of Parent, and none of the directors or executive officers of Croesus, Ahold U.S.A. or the Purchaser, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which any such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. Item 3. Past Contacts, Transactions or Negotiations with the Subject Company. (a)-(b) The information set forth in the Introduction, Section 10-- "Background of the Offer; Contacts with the Company" and Section 11--"Purpose of the Offer; Plans for the Company; Certain Agreements" of the Offer to Purchase is incorporated herein by reference. Item 4. Source and Amount of Funds or Other Consideration. (a)-(c) The information set forth in Section 9--"Source and Amount of Funds" of the Offer to Purchase is incorporated herein by reference. 5 Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidder. (a)-(g) The information set forth in the Introduction and Section 10-- "Background of the Offer; Contacts with the Company", Section 11--"Purpose of the Offer; Plans for the Company; Certain Agreements", Section 12--"Dividends and Distributions" and Section 13--"Effect of the Offer on the Market for the Shares; Exchange Act Registration" of the Offer to Purchase is incorporated herein by reference. Item 6. Interest in Securities of the Subject Company. (a)-(b) The information set forth in the Introduction, Section 8--"Certain Information Concerning the Purchaser, Ahold U.S.A., Croesus and Parent" and Section 10--"Background of the Offer; Contacts with the Company" and Schedule I of the Offer to Purchase is incorporated herein by reference. Item 7. Contracts, Arrangements, Understandings or Relationships with Respect to the Subject Company's Securities. The information set forth in the Introduction, Section 10--"Background of the Offer; Contacts with the Company", Section 11--"Purpose of the Offer; Plans for the Company; Certain Agreements", Section 9--"Source and Amount of Funds" and Section 15--"Certain Legal Matters; Regulatory Approvals" of the Offer to Purchase is incorporated herein by reference. Item 8. Persons Retained, Employed or to be Compensated. The information set forth in Section 16--"Fees and Expenses" of the Offer to Purchase is incorporated herein by reference. Item 9. Financial Statements of Certain Bidders. The information set forth in Section 8--"Certain Information Concerning the Purchaser, Ahold U.S.A., Croesus and Parent" of the Offer to Purchase is incorporated herein by reference. Item 10. Additional Information. (a) The information set forth in Section 11--"Purpose of the Offer; Plans for the Company; Certain Agreements" of the Offer to Purchase is incorporated herein by reference. (b)-(c) The information set forth in Section 15--"Certain Legal Matters; Regulatory Approvals" of the Offer to Purchase is incorporated herein by reference. (d) The information set forth in Section 13--"Effect of the Offer on the Market for the Shares; Exchange Act Registration" of the Offer to Purchase is incorporated herein by reference. (e) Not applicable. (f) The information set forth in the entire text of each of the Offer to Purchase and the Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively, is incorporated herein by reference. 6 Item 11. Material to be Filed as Exhibits.
Exhibit Number Description -------------- ----------- Exhibit (a)(1) Offer to Purchase. Exhibit (a)(2) Letter of Transmittal. Exhibit (a)(3) Form of letter to brokers, dealers, commercial banks, trust companies and other nominees. Exhibit (a)(4) Form of letter to be used by brokers, dealers, commercial banks, trust companies and nominees to their clients. Exhibit (a)(5) Press Release, dated March 9, 1999 announcing the tender offer. Exhibit (a)(6) Form of newspaper advertisement, dated March 15, 1999, published in the Wall Street Journal. Exhibit (a)(7) Notice of Guaranteed Delivery. Exhibit (a)(8) Guidelines for Substitute Form W-9. Exhibit (b)(1) Amended and Restated U.S.$1,000,000,000 Multicurrency Revolving Credit Agreement, dated December 18, 1996, amended and restated on September 7, 1998, by and between Koninklijke Ahold N.V., Ahold U.S.A., Inc., ABN AMRO Bank N.V., Chase Investment Bank Limited and J.P. Morgan Securities Ltd. as Arrangers, The Chase Manhattan Bank as Facility, Swing-Line, Letter of Credit and Short Term Advances Agent, Chase Manhattan International Limited as Multicurrency Facility Agent and certain financial institutions named therein. Exhibit (c)(1) Confidentiality Letter Agreement, dated as of December 30, 1998, between SMG-II Holdings Corporation and Koninklijke Ahold N.V. Exhibit (c)(2) Stockholders Agreement, dated as of March 9, 1999, by and among Koninklijke Ahold N.V., Ahold Acquisition, Inc. and the Stockholders listed on Exhibit 1 thereto. Exhibit (c)(3) Agreement and Plan of Merger, dated as of March 9, 1999, by and among Koninklijke Ahold N.V., Ahold Acquisition, Inc. and SMG- II Holdings Corporation. Exhibit (c)(4) Stock Purchase Agreement, dated as of March 9, 1999 by and among Koninklijke Ahold N.V., Ahold Acquisition, Inc., SMG-II Holdings Corporation and PTK Holdings, Inc.
7 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: March 15, 1999 KONINKLIJKE AHOLD N.V. By: /s/ R. G. Tobin ---------------------------------- Name: R.G. Tobin Title: Executive Vice President Dated: March 15, 1999 CROESUS, INC. By: /s/ R. G. Tobin ---------------------------------- Name: R.G. Tobin Title: Authorized Signatory Dated: March 15, 1999 AHOLD U.S.A., INC. By: /s/ R. G. Tobin ---------------------------------- Name: R. G. Tobin Title: President and Chief Executive Officer Dated: March 15, 1999 AHOLD ACQUISITION, INC. By: /s/ R. G. Tobin ---------------------------------- Name: R. G. Tobin Title: President 8 EX-99.(A)(1) 2 OFFER TO PURCHASE Offer to Purchase for Cash All of the Outstanding Shares of $3.52 Cumulative Exchangeable Redeemable Preferred Stock of Supermarkets General Holdings Corporation at $38.25 Net Per Share by Ahold Acquisition, Inc. An Indirect Wholly-Owned Subsidiary of Koninklijke Ahold N.V. (Royal Ahold) THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, APRIL 9, 1999 UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES OF $3.52 CUMULATIVE EXCHANGEABLE REDEEMABLE PREFERRED STOCK (THE "SHARES") OF SUPERMARKETS GENERAL HOLDINGS CORPORATION (THE "COMPANY") WHICH, TOGETHER WITH SHARES PREVIOUSLY ACQUIRED BY KONINKLIJKE AHOLD N.V. (ROYAL AHOLD) ("PARENT"), ANY DIRECT OR INDIRECT SUBSIDIARY OF PARENT (INCLUDING AHOLD ACQUISITION, INC. (THE "PURCHASER")), THE COMPANY, OR ANY DIRECT OR INDIRECT SUBSIDIARY OF THE COMPANY, REPRESENT AT LEAST 66 2/3% OF ALL OF THE ISSUED AND OUTSTANDING SHARES ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION"), (II) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER ANTITRUST LAWS DESCRIBED IN SECTION 15--"CERTAIN LEGAL MATTERS; REGULATORY APPROVALS" AND (III) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS DESCRIBED IN SECTION 14--"CONDITIONS OF THE OFFER". THE OFFER IS AN INTEGRAL PART OF THE TRANSACTIONS CONTEMPLATED BY, AND IS BEING MADE PURSUANT TO, THE AGREEMENT AND PLAN OF MERGER DATED MARCH 9, 1999 (THE "SMG-II MERGER AGREEMENT"), BY AND AMONG PARENT, THE PURCHASER AND SMG-II HOLDINGS CORPORATION ("SMG-II"). SEE SECTION 11--"PURPOSE OF THE OFFER; PLANS FOR THE COMPANY; CERTAIN AGREEMENTS". SMG-II OWNS ALL OF THE ISSUED AND OUTSTANDING SHARES OF THE CAPITAL STOCK OF THE COMPANY OTHER THAN THE SHARES AND, THROUGH THE COMPANY AND PTK HOLDINGS, INC. ("PTK"), ALL OF THE ISSUED AND OUTSTANDING SHARES OF THE CAPITAL STOCK (THE "PATHMARK STOCK") OF PATHMARK STORES, INC. PURSUANT TO THE SMG-II MERGER AGREEMENT, PARENT WILL BE ACQUIRING ALL OF THE ISSUED AND OUTSTANDING SHARES OF THE CAPITAL STOCK OF SMG-II THROUGH A MERGER OF THE PURCHASER WITH AND INTO SMG-II (THE "SMG-II MERGER") FOR AN AGGREGATE CONSIDERATION OF $55,731,834 WHICH, WHEN AGGREGATED WITH THE TOTAL POTENTIAL CONSIDERATION PAYABLE BY THE PURCHASER TO THE HOLDERS OF SHARES PURSUANT TO THE OFFER, EQUALS $242,800,000. HOLDERS OF 84% OF ALL OF THE ISSUED AND OUTSTANDING SHARES OF THE CAPITAL STOCK OF SMG-II HAVE AGREED TO VOTE IN FAVOR OF THE SMG-II MERGER. IN THE EVENT THAT THE MINIMUM CONDITION IS NOT MET, THE OFFER WILL EXPIRE WITHOUT ANY OF THE SHARES BEING PURCHASED HEREUNDER AND THE PURCHASER WILL INSTEAD ACQUIRE THE PATHMARK STOCK FROM PTK FOR A PURCHASE PRICE OF $242,800,000. IN SUCH EVENT, THE ONLY MATERIAL ASSET OF THE COMPANY WOULD BE THE OWNERSHIP OF ALL OF THE ISSUED AND OUTSTANDING SHARES OF THE CAPITAL STOCK OF PTK, THE ONLY MATERIAL ASSET OF WHICH IN TURN WOULD BE THE NET AFTER TAX PROCEEDS FROM THE SALE OF THE PATHMARK STOCK TO THE PURCHASER. THE BOARD OF DIRECTORS OF THE COMPANY (TWO MEMBERS OF WHICH WERE ELECTED BY THE HOLDERS OF THE SHARES, VOTING AS A SEPARATE CLASS) HAS UNANIMOUSLY DETERMINED THAT EACH OF THE OFFER AND THE MERGER OF THE COMPANY WITH AND INTO SMG-II AS CONTEMPLATED BY THE SMG-II MERGER AGREEMENT IS FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF THE SHARES AND UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF THE SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. --------------- IMPORTANT Any stockholder desiring to tender all or any portion of the Shares owned by such stockholder should either (i) complete and sign the Letter of Transmittal or a facsimile thereof in accordance with the instructions in the Letter of Transmittal and mail or deliver it together with the certificate(s) evidencing tendered Shares, and any other required documents, to the Depositary or (ii) tender such Shares pursuant to the procedures for book-entry transfer set forth in Section 3--"Procedures for Tendering Shares" or (iii) request such stockholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such stockholder. Any stockholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if such stockholder desires to tender such Shares. Any stockholder who desires to tender Shares and whose certificates evidencing such Shares are not immediately available, or who cannot comply with the procedures for book-entry transfer described in this Offer to Purchase on a timely basis, may tender such Shares by following the procedures for guaranteed delivery set forth in Section 3--"Procedures for Tendering Shares". Questions and requests for assistance may be directed to the Information Agent or the Dealer Managers at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal or other related tender offer materials may be obtained from the Information Agent or from brokers, dealers, commercial banks or trust companies. --------------- The Dealer Managers for the Offer are: Goldman, Sachs & Co. --------------- The date of this Offer to Purchase is March 15, 1999. TABLE OF CONTENTS
Page ---- INTRODUCTION.............................................................. 1 THE TENDER OFFER.......................................................... 3 1. Terms of the Offer.................................................. 3 2. Acceptance for Payment and Payment for Shares....................... 4 3. Procedures for Tendering Shares..................................... 6 4. Withdrawal Rights................................................... 8 5. Certain United States Federal Income Tax Consequences............... 9 6. Price Range of Shares; Dividends.................................... 10 7. Certain Information Concerning the Company.......................... 10 8. Certain Information Concerning the Purchaser, Ahold U.S.A., Croesus and Parent......................................................... 16 9. Source and Amount of Funds.......................................... 19 10. Background of the Offer............................................. 20 11. Purpose of the Offer; Plans for the Company; Certain Agreements..... 23 12. Dividends and Distributions......................................... 43 13. Effect of the Offer on the Market for the Shares; Exchange Act Registration............................................................ 44 14. Conditions of the Offer............................................. 45 15. Certain Legal Matters; Regulatory Approvals......................... 46 16. Fees and Expenses................................................... 50 17. Miscellaneous....................................................... 50 SCHEDULE I Information Concerning the Directors and Executive Officers of Koninklijke Ahold N.V., Croesus, Inc., Ahold U.S.A., Inc. and Ahold Acquisition, Inc.
i To the Holders of the $3.52 Cumulative Exchangeable Redeemable Preferred Stock of Supermarkets General Holdings Corporation: INTRODUCTION Ahold Acquisition, Inc., a Delaware corporation (the "Purchaser"), and an indirect wholly-owned subsidiary of Koninklijke Ahold N.V. (Royal Ahold), a public company with limited liability incorporated under the laws of The Netherlands with its corporate seat in Zaandam (Municipality Zaanstad), The Netherlands ("Parent"), hereby offers to purchase all of the issued and outstanding shares of the $3.52 Cumulative Exchangeable Redeemable Preferred Stock, par value $0.01 per share (the "Shares"), of Supermarkets General Holdings Corporation, a Delaware corporation (the "Company"), at a price of $38.25 per Share, net to the seller in cash, without interest thereon (the "Offer Price"), upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, as they may be amended and supplemented from time to time, together constitute the "Offer"). Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares pursuant to the Offer. The Purchaser will pay all charges and expenses of Goldman, Sachs & Co., as Dealer Managers (the "Dealer Managers"), Citibank, N.A., as depositary (the "Depositary"), and Morrow & Co., Inc. as Information Agent (the "Information Agent"), in each case incurred in connection with the Offer. See Section 16--"Fees and Expenses". The Offer is an integral part of the transactions contemplated by, and is being made pursuant to, an Agreement and Plan of Merger, dated as of March 9, 1999 (the "SMG-II Merger Agreement"), by and among Parent, the Purchaser and SMG-II Holdings Corporation, a Delaware corporation ("SMG-II"), pursuant to which Parent will be acquiring all of the issued and outstanding shares of the capital stock of SMG-II through the merger of the Purchaser with and into SMG- II (the "SMG-II Merger"), subject to the terms and conditions contained in the SMG-II Merger Agreement. The aggregate consideration for the acquisition of all of the issued and outstanding shares of the capital stock of SMG-II is $55,731,834 which, when aggregated with the total potential consideration payable by the Purchaser to the holders of Shares pursuant to the Offer, equals $242,800,000. The Purchaser has been informed that, as of March 9, 1999, SMG-II is the owner of all of the issued and outstanding shares of Class A Common Stock and Class B Common Stock of the Company which shares represent, together with the Shares, all of the issued and outstanding shares of the capital stock of the Company. The Offer is conditioned upon, among other things, there being validly tendered and not properly withdrawn prior to the expiration of the Offer a number of Shares which, together with Shares previously acquired by Parent, any direct or indirect subsidiary of Parent (including the Purchaser), the Company, or any direct or indirect subsidiary of the Company, represent at least 66 2/3% of the Shares on a fully diluted basis (the "Minimum Condition"). The Offer is also subject to other terms and conditions. See Section 14--"Conditions of the Offer". The Purchaser has been informed that, as of March 9, 1999, there were 4,890,671 Shares issued and outstanding and that no Shares were reserved for issuance upon the exercise of outstanding options granted under the Company's stock option plans or held in the Company's treasury. As a result, as of such date, the Minimum Condition would be satisfied if 3,260,448 Shares were tendered and not properly withdrawn prior to the expiration of the Offer. The SMG-II Merger Agreement provides that, among other things, in the event all of the conditions to the consummation of the SMG-II Merger (other than the Minimum Condition and certain related conditions) have been satisfied or waived, but the Minimum Condition or certain related conditions have not been satisfied or waived, SMG-II is obligated, pursuant to 1 the terms and conditions of a Stock Purchase Agreement, dated as of March 9, 1999 (the "Alternative Stock Purchase Agreement"), by and among SMG-II, PTK Holdings, Inc. ("PTK"), a wholly-owned subsidiary of the Company, Parent and the Purchaser, to cause PTK to sell all of the shares of the capital stock (the "Pathmark Stock") of Pathmark Stores, Inc. ("Pathmark") to the Purchaser for a purchase price, payable in cash, equal to $242,800,000. In such event, the Offer will expire without any Shares being purchased hereunder, and the only material asset of the Company would be its ownership of all of the shares of the capital stock of PTK, the only material asset of which in turn would be the net after tax proceeds from the sale of the Pathmark Stock to the Purchaser pursuant to the Alternative Stock Purchase Agreement. The SMG-II Merger Agreement provides that, promptly upon consummation of the SMG-II Merger, Parent will cause the Company to be merged with and into SMG-II (the "Company Merger"), pursuant to a Merger Agreement (the "Company Merger Agreement") in the form attached as an exhibit to the SMG-II Merger Agreement and to be entered into at such time by and between SMG-II and the Company. At the effective time of the Company Merger (the "Effective Time"), each of the Shares (other than Shares held by any subsidiary of the Company or in the treasury of the Company, or held, directly or indirectly, by Parent or any direct or indirect subsidiary of Parent (including the Shares acquired by the Purchaser pursuant to the Offer), which Shares will be canceled, and other than Shares, if any, held by stockholders who perfect their appraisal rights under the Delaware General Corporation Law (the "DGCL")) will be converted into the right to receive an amount in cash equal to $38.25. The Company Merger Agreement is more fully described in Section 11--"Purpose of the Offer; Plans for the Company; Certain Agreements". Under the DGCL, if the Purchaser acquires, pursuant to the Offer or otherwise, at least 90% of the then outstanding Shares, the Purchaser will be able to approve and effect the Company Merger without a vote of the Company's stockholders. If, however, the Purchaser does not acquire at least 90% of the then outstanding Shares pursuant to the Offer or otherwise, a vote of the Company's stockholders to effect the Company Merger is required under the DGCL and a longer period of time will be required to effect the Company Merger. See Section 11--"Purpose of the Offer; Plans for the Company; Certain Agreements". The board of directors of the Company (the "Board of Directors"), two members of which were elected by the holders of the Shares, voting separately as a class, has unanimously determined that each of the Offer and the Company Merger is fair to, and in the best interests of, the holders of the Shares and unanimously recommends that the holders of the Shares accept the Offer and tender their Shares pursuant to the Offer. The consummation of the SMG-II Merger is subject to the satisfaction or waiver of certain conditions set forth in the SMG-II Merger Agreement including, without limitation, the Minimum Condition and the approval of the SMG-II Merger by the holders of 66 2/3% of all of the issued and outstanding shares of the capital stock of SMG-II, voting as one class, with each share having one vote. Concurrently with the execution of the SMG-II Merger Agreement and, as required by Parent and the Purchaser, Merrill Lynch Capital Appreciation Partnership No. IX, L.P., ML Offshore LBO Partnership No. IX, ML Employees LBO Partnership No. I, L.P., ML IBK Positions, Inc., Merchant Banking L.P. No. 1, Merrill Lynch KECALP L.P. 1987, Merrill Lynch Capital Appreciation Partnership No. B-X, L.P., ML Offshore LBO Partnership No. B-X, MLCP Associates, L.P. No. II, Merchant Banking L.P. No. IV, Merrill Lynch KECALP L.P. 1989, Merrill Lynch KECALP L.P. 1991, The Equitable Life Assurance Society of the United States, Equitable Deal Flow Fund, L.P. and James L. Donald (collectively, the "SMG-II Stockholders"), entered into a Stockholders Agreement, dated March 9, 1999 (the "Stockholders Agreement") with Parent and the Purchaser. Pursuant to the Stockholders Agreement, each of the SMG-II Stockholders has (i) agreed to vote the shares of the capital stock of SMG-II owned by it in favor of the SMG-II Merger and (ii) granted the Purchaser an option to purchase, under certain circumstances, the shares of the capital stock of SMG-II owned by it. The number of shares of the capital stock of SMG- II owned collectively by the SMG-II Stockholders represents 84% of all of the issued and outstanding shares of the capital stock of SMG-II. 2 This Offer to Purchase and the Letter of Transmittal contain important information which should be read carefully before any decision is made with respect to the Offer. THE TENDER OFFER 1. Terms of the Offer. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any extension or amendment), the Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date (as hereinafter defined) and not withdrawn in accordance with Section 4-- "Withdrawal Rights". The term "Expiration Date" means 12:00 Midnight, New York City time, on Friday, April 9, 1999, unless and until the Purchaser, in its sole discretion, shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. The Offer is conditioned upon, among other things, satisfaction of the Minimum Condition and the expiration or termination of any applicable waiting period under the antitrust laws described in Section 15--"Certain Legal Matters; Regulatory Approvals". The Offer is also subject to certain other conditions set forth in Section 14--"Conditions of the Offer". If these or any of the other conditions referred to in Section 14--"Conditions of the Offer" are not satisfied or any of the events specified in Section 14--"Conditions of the Offer" have occurred or are determined by the Purchaser to have occurred prior to the Expiration Date, the Purchaser reserves the right (but is not obligated) to (i) decline to purchase any of the Shares tendered in the Offer and terminate the Offer, and return all tendered Shares to the tendering stockholders, (ii) waive or amend any or all conditions to the Offer, to the extent permitted by applicable law and subject to the provisions of the SMG-II Merger Agreement and to complying with applicable rules and regulations of the Securities and Exchange Commission (the "Commission"), (iii) purchase all Shares validly tendered or (iv) subject to the limitations described below, extend the Offer and, subject to the right of a tendering stockholder to withdraw its Shares until the Expiration Date, retain the Shares which have been tendered during the period or periods for which the Offer is extended, provided, however, that, subject to the terms of the SMG-II Merger Agreement, the Minimum Condition may be waived by the Purchaser in its sole discretion. Subject to the applicable rules and regulations of the Commission and to applicable law, the Purchaser expressly reserves the right, in its sole discretion, at any time and from time to time, to extend for any reason the period of time during which the Offer is open, including upon the occurrence of any of the events specified in Section 14--"Conditions of the Offer", by giving notice of such extension to the Depositary and by making a public announcement thereof. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the rights of a tendering stockholder to withdraw its Shares. See Section 4-- "Withdrawal Rights". Subject to the applicable rules and regulations of the Commission and to applicable law, the Purchaser also expressly reserves the right, in its sole discretion, at any time and from time to time, (i) to delay acceptance for payment of, or, regardless of whether such Shares were theretofore accepted for payment, payment for, any Shares pending receipt of any regulatory approval specified in Section 15--"Certain Legal Matters; Regulatory Approvals" or in order to comply in whole or in part with any other applicable law, (ii) to terminate the Offer and not accept for payment any Shares if any of the conditions referred to in Section 14--"Conditions of the Offer" are not satisfied or any of the events specified in Section 14--"Conditions of the Offer" have occurred and (iii) subject to the terms of the 3 SMG-II Merger Agreement, to waive any condition, or otherwise amend the Offer in any respect by giving oral or written notice of such delay, termination, waiver or amendment to the Depositary and by making a public announcement thereof. The Purchaser reserves the right to modify the terms of the Offer, including without limitation, except as provided below, to extend the Offer beyond any scheduled expiration date, except that, without the written consent of SMG-II, the Purchaser will not reduce the number of Shares sought in the Offer, reduce the Offer Price, or modify, waive or add to the conditions of the Offer referred to in Section 14--"Conditions of the Offer". The Purchaser currently intends to extend the offer from time to time if and to the extent the applicable waiting period under antitrust laws described in Section 15-- "Certain Legal Matters; Regulatory Approvals" has not expired or been terminated on the Expiration Date. The Purchaser acknowledges that (i) Rule 14e-1(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires the Purchaser to pay the consideration offered or return the Shares tendered promptly after the termination or withdrawal of the Offer, and (ii) the Purchaser may not delay acceptance for payment of, or payment for (except as provided in clause (i) of the first sentence of the second preceding paragraph), any Shares upon the occurrence of any of the conditions specified in Section 14--"Conditions of the Offer" without extending the period of time during which the Offer is open. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the right of a tendering stockholder to withdraw its Shares. Any such extension, delay, termination, waiver or amendment will be followed, as promptly as practicable, by public announcement thereof, with such announcement in the case of an extension to be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. Subject to applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act), which require that material changes be promptly disseminated to stockholders in a manner reasonably designed to inform them of such changes and without limiting the manner in which the Purchaser may choose to make any public announcement, the Purchaser will have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a press release to the Dow Jones News Service or as otherwise may be required by applicable law. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer, the Purchaser will extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The Company has provided the Purchaser with the Company's list of holders of the Shares and security position listings in respect of the Shares for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase, the related Letter of Transmittal and other relevant materials will be mailed to record holders of Shares whose names appear on the Company's list of holders of the Shares and will be furnished, for subsequent transmittal to beneficial owners of Shares, to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the list of holders of the Shares or, if applicable, who are listed as participants in the security position listing of The Depository Trust Company. 2. Acceptance for Payment and Payment for Shares. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will purchase, by accepting for payment, and will pay for, all Shares validly tendered prior to the Expiration Date (and not properly withdrawn in accordance with Section 4--"Withdrawal Rights") promptly after the later to occur of (i) the Expiration Date and (ii) the receipt of all necessary regulatory approvals specified in Section 15--"Certain Legal Matters; Regulatory Approvals". Subject to applicable rules of the Commission and the terms of the SMG-II 4 Merger Agreement, the Purchaser expressly reserves the right, in its discretion, to delay acceptance for payment of, or payment for, Shares pending receipt of any regulatory approvals specified in Section 15--"Certain Legal Matters; Regulatory Approvals" or satisfaction or waiver of the Minimum Condition. See Section 14--"Conditions of the Offer". In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (i) the certificates evidencing such Shares (the "Share Certificates") or timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Shares into the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in Section 3--"Procedures for Tendering Shares", (ii) the Letter of Transmittal (or facsimile thereof), properly completed and duly executed with any required signature guarantees, or an Agent's Message (as defined below) in connection with a book-entry transfer and (iii) any other documents required by the Letter of Transmittal. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary forming a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from a participant (the "Participant") in the Book-Entry Transfer Facility tendering the Shares that such Participant has received and agrees to be bound by the terms of the Offer and that the Purchaser may enforce such agreement against such participant. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment (and thereby purchased) Shares validly tendered and not properly withdrawn if, as and when the Purchaser gives notice to the Depositary of the Purchaser's acceptance for payment of such Shares. Payment for Shares accepted pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payments from the Purchaser and transmitting payments to such tendering stockholders whose Shares have been accepted for payment. Under no circumstances will interest on the purchase price for Shares be paid by the Purchaser, regardless of any delay in making such payment or extension of the Expiration Date. Upon the deposit of funds with the Depositary for the purpose of making payments to tendering stockholders, the Purchaser's obligation to make such payment shall be satisfied, and tendering stockholders must thereafter look solely to the Depositary for payment of amounts owed to them by reason of the acceptance for payment of Shares pursuant to the Offer. If any tendered Shares are not accepted for payment for any reason pursuant to the terms and conditions of the Offer, or if Share Certificates are submitted evidencing more Shares than are tendered, Share Certificates evidencing Shares not purchased will be returned, without expense to the tendering stockholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility pursuant to the procedure set forth in Section 3-- "Procedures for Tendering Shares", such Shares will be credited to an account maintained at the Book- Entry Transfer Facility), as promptly as practicable following the expiration, termination or withdrawal of the Offer. If, prior to the Expiration Date, the Purchaser increases the consideration to be paid per Share pursuant to the Offer, the Purchaser will pay such increased consideration for all such Shares purchased pursuant to the Offer, whether or not such Shares were tendered prior to such increase in consideration. The Purchaser reserves the right to assign to Parent, or to any other direct or indirect wholly-owned subsidiary of Parent, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such assignment will not relieve the Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 5 3. Procedures for Tendering Shares. Valid Tender of Shares. In order for Shares to be validly tendered pursuant to the Offer, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry delivery of Shares, and any other required documents, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date and either (i) the Share Certificates evidencing tendered Shares must be received by the Depositary at such address or Shares must be tendered pursuant to the procedure for book-entry transfer described below and a Book-Entry Confirmation must be received by the Depositary, in each case prior to the Expiration Date, or (ii) the tendering stockholder must comply with the guaranteed delivery procedures described below. The method of delivery of Share Certificates and all other required documents, including delivery through the Book-Entry Transfer Facility, is at the option and risk of the tendering stockholder, and the delivery will be deemed made only when actually received by the Depositary. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery. Book-Entry Transfer. The Depositary will establish an account with respect to the Shares at the Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer to Purchase, and any financial institution that is a participant in the Book-Entry Transfer Facility's systems may make book-entry delivery of Shares by causing the Book- Entry Transfer Facility to transfer such Shares into the Depositary's account at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility's procedures for transfer. In addition, Shares held through the Book- Entry Transfer Facility must be tendered to the Depositary by means of delivery of the Letter of Transmittal by Agent's Message. The term "Agent's Message" means a message transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of the Book-Entry Transfer Facility confirmation system that states that the Book-Entry Transfer Facility has received an express acknowledgement from the Participant in the Book-Entry Transfer Facility tendering such Shares that such Participant has received and agrees to be bound by the terms of the Offer. In order to effect a valid tender of Shares through the Book-Entry Transfer Facility, the Shares, along with an Agent's Message and any other required documents, must, in any case, be transmitted to, and received by, the Depositary prior to the Expiration Date, or the tendering stockholder must comply with the guaranteed delivery procedures described below. Delivery of documents or instructions to the Book- Entry Transfer Facility in accordance with the Book-Entry Transfer Facility's procedures does not constitute delivery to the Depositary. Signature Guarantee. Signatures on all Letters of Transmittal must be guaranteed by a financial institution (including most banks, savings and loan associations and brokerage houses) which is a participant in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (an "Eligible Institution"), unless the Shares tendered thereby are tendered (i) by a registered holder of Shares who has not completed the box entitled "Special Payment Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. See Instruction 1 to the Letter of Transmittal. If a Share Certificate is registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or a Share Certificate not accepted for payment or not tendered is to be returned, to a person other than the registered holder(s), then the Share Certificate must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on the Share Certificate, with the signature(s) on such Share Certificate or stock powers guaranteed as described above. See Instructions 1, 5 and 7 to the Letter of Transmittal. 6 Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's Share Certificates are not immediately available or time will not permit all required documents to reach the Depositary prior to the Expiration Date or the procedure for book-entry transfer cannot be completed on a timely basis, such Shares may nevertheless be tendered if all the following conditions are satisfied: (i) the tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchaser herewith, is received by the Depositary as provided below prior to the Expiration Date; and (iii) the Share Certificates for all tendered Shares, in proper form for transfer, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantee (or, in the case of a book-entry transfer, a Book-Entry Confirmation along with an Agent's Message) and any other documents required by such Letter of Transmittal, are received by the Depositary within three New York Stock Exchange trading days after the date of execution of the Notice of Guaranteed Delivery. Any Notice of Guaranteed Delivery may be delivered by hand or transmitted by hand or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery. In the case of Shares held through the Book-Entry Transfer Facility, the Notice of Guaranteed Delivery must be delivered to the Depositary by a Participant by means of an Agent's Message via the confirmation system of the Book-Entry Transfer Facility. Notwithstanding any other provision hereof, payment for Shares purchased pursuant to the Offer will, in all cases, be made only after timely receipt by the Depositary of (i) the Share Certificates evidencing such Shares or a Book- Entry Confirmation of the delivery of such Shares, (ii) a properly completed and duly executed Letter of Transmittal or facsimile thereof (or, in the case of a book-entry transfer, an Agent's Message) and (iii) any other documents required by the Letter of Transmittal. Determination of Validity. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tendered Shares pursuant to any of the procedures described above will be determined by the Purchaser, in its sole discretion, whose determination will be final and binding on all parties. The Purchaser reserves the absolute right to reject any or all tenders of any Shares determined by it not to be in proper form or if the acceptance for payment of, or payment for, such Shares may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right, in its sole discretion, to waive any of the conditions of the Offer (subject to the terms of the SMG-II Merger Agreement) or any defect or irregularity in any tender with respect to Shares of any particular stockholder, whether or not similar defects or irregularities are waived in the case of other stockholders. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. The Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. Appointment as Proxy. By executing a Letter of Transmittal (or delivering an Agent's Message) as set forth above, a tendering stockholder irrevocably appoints designees of the Purchaser as such stockholder's proxies, each with full power of substitution, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by the Purchaser (and any and all dividends, distributions, rights, other Shares or other securities issued or issuable in respect of such Shares on or after March 9, 1999). All such proxies shall be considered coupled with 7 an interest in the tendered Shares. This appointment will be effective if, when, and only to the extent that, the Purchaser accepts such Shares for payment pursuant to the Offer. Upon such acceptance for payment, all prior proxies given by such stockholder with respect to such Shares and other securities will, without further action, be revoked, and no subsequent proxies may be given. The designees of the Purchaser will, with respect to the Shares and other securities for which the appointment is effective, be empowered to exercise all voting and other rights of such stockholder as they in their sole discretion may deem proper at any annual, special, adjourned or postponed meeting of the Company's stockholders, by written consent or otherwise, and the Purchaser reserves the right to require that, in order for Shares or other securities to be deemed validly tendered, immediately upon the Purchaser's acceptance (for payment of such Shares), the Purchaser must be able to exercise full voting rights with respect to such Shares and other securities. Backup Withholding. To prevent United States federal backup withholding tax with respect to payment to certain stockholders of the Offer Price purchased pursuant to the Offer, each such stockholder must provide the Depositary with such stockholder's correct taxpayer identification number and certify that such stockholder is not subject to backup withholding tax by completing the Substitute Form W-9 included as part of the Letter of Transmittal. If backup withholding applies with respect to a stockholder or if a stockholder fails to deliver a completed Substitute Form W-9 to the Depositary, the Depositary is required to withhold 31% of any payments made to such stockholder. See Section 5--"Certain United States Federal Income Tax Consequences" of this Offer to Purchase and Instruction 9 to the Letter of Transmittal. The Purchaser's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the tendering stockholder and the Purchaser upon the terms and subject to the conditions of the Offer. 4. Withdrawal Rights. Tenders of Shares made pursuant to the Offer are irrevocable except that such Shares may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any time after May 13, 1999, or at such later time as may apply if the Offer is extended. If the Purchaser extends the Offer, is delayed in its acceptance for payment of Shares or is unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent that tendering stockholders are entitled to withdrawal rights as described in this Section 4--"Withdrawal Rights". Any such delay will be an extension of the Offer to the extent required by law. For a withdrawal to be effective, a written notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares, if different from that of the person who tendered such Shares. If Share Certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such Share Certificates, the serial numbers shown on such Share Certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution, unless such Shares have been tendered for the account of an Eligible Institution. Shares tendered pursuant to the procedure for book-entry transfer as set forth in Section 3-- "Procedures for Tendering Shares", may be withdrawn only by means of the withdrawal procedures made available by the Book-Entry Transfer Facility to the Participants, must specify the name and number of the account at the Book- Entry Transfer Facility to be credited with the withdrawn Shares and must otherwise comply with the Book-Entry Transfer Facility's procedures. 8 Withdrawals of tendered Shares may not be rescinded (without the Purchaser's consent), and any Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser, in its sole discretion, which determination will be final and binding. None of Parent, the Purchaser, the Depositary, the Information Agent, the Dealer Managers or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Shares properly withdrawn may be re-tendered at any time prior to the Expiration Date by following any of the procedures described in Section 3-- "Procedures for Tendering Shares". 5. Certain United States Federal Income Tax Consequences. The receipt of cash for Shares pursuant to the Offer or the Company Merger by a stockholder that is a citizen or resident of the United States, a partnership or corporation created in or under the laws of the United States or any state thereof (including the District of Columbia), an estate, the income of which is subject to United States federal income taxation regardless of its source or a trust (i) the administration over which a United States court can exercise primary supervision and (ii) all of the substantial decisions of which one or more United States persons have the authority to control (a "U.S. Holder") will be a taxable transaction for United States federal income tax purposes and may also be a taxable transaction under applicable state, local or foreign tax laws. In general, a U.S. Holder will recognize gain or loss for United States federal income tax purposes equal to the difference, if any, between the amount realized from the sale of Shares and such U.S. Holder's adjusted tax basis in such Shares. Assuming that the Shares constitute a capital asset in the hands of the U.S. Holder, such gain or loss will be capital gain or loss and in the case of a noncorporate U.S. Holder, the maximum marginal United States federal income tax rate applicable to such gain will be lower than the maximum marginal United States federal income tax rate applicable to ordinary income if such U.S. Holder's holding period for such Shares exceeds one year. The foregoing discussion may not be applicable to certain types of stockholders, including stockholders who acquired Shares pursuant to the exercise of stock options or otherwise as compensation, holders that are not U.S. Holders and stockholders that are otherwise subject to special tax rules, such as financial institutions, insurance companies, dealers or traders in securities or currencies, tax-exempt entities, persons that hold Shares as a position in a "straddle" or as part of a "hedging" or "conversion" transaction for tax purposes and persons that have a "functional currency" other than the United States dollar ("Dollar"). Information Reporting and Backup Withholding Tax. United States information reporting will apply to proceeds from the sale of Shares paid within the United States to a U.S. Holder (other than an "exempt recipient"). As noted in Section 3--"Procedures for Tendering Shares", a stockholder (other than an "exempt recipient," including a corporation and a non-U.S. Holder that provides appropriate certification (if the payor does not have actual knowledge that such certificate is false)) that receives cash in exchange for Shares may be subject to United States federal backup withholding tax at a rate equal to 31%, unless such stockholder provides its taxpayer identification number and certifies that such stockholder is not subject to backup withholding tax by submitting a completed Substitute Form W-9 to the Depositary. Accordingly, each stockholder should complete, sign and submit the Substitute Form W-9 included as part of the Letter of Transmittal in order to avoid the imposition of such backup withholding tax. The United States federal income tax discussion set forth above is included for general information and is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change (possibly retroactively). Stockholders are urged to consult their tax advisors with respect to the 9 specific tax consequences of the Offer to them, including the application and effect of the alternative minimum tax and state, local and foreign tax laws. 6. Price Range of Shares; Dividends. The Shares have a liquidation preference of $25.00 per Share and are entitled to cumulative quarterly dividends at an annual rate of $3.52 per Share, when, as, and if declared by the Board of Directors. The Company is currently in arrears on payment of 25 quarterly dividends on the Shares totaling $22 per Share and does not expect to receive cash flow sufficient to permit payments of dividends on the Shares in the foreseeable future. Parent and the Purchaser have been advised that the Shares are traded on the over-the-counter market on a limited and sporadic basis. The following table sets forth, for the periods indicated, the high and low bid quotations per Share as reported by Bloomberg L.P. Such quotations represent inter-dealer quotations, without adjustment for retail markets, markdowns or commissions, and do not necessarily represent actual transactions.
Market Quotation ----------------- High Low -------- -------- 1997 Fiscal Year: First Quarter.......................................... $25.25 $20.00 Second Quarter......................................... 22.50 18.00 Third Quarter.......................................... 19.97 16.50 Fourth Quarter......................................... 24.75 15.00 1998 Fiscal Year: First Quarter.......................................... 21.25 10.00 Second Quarter......................................... 33.25 20.88 Third Quarter.......................................... 29.00 19.00 Fourth Quarter......................................... 25.50 14.88 1999 Fiscal Year: First Quarter (through March 8, 1999).................. 25.50 21.00
On March 3, 1999, the last day on which the Shares were traded prior to the public announcement of the Offer, the reported closing bid quotation of the Shares on the over-the-counter market was $25.50 per Share. On March 10, 1999, the last day on which the Shares were traded prior to the date of this Offer to Purchase, the reported closing bid quotation of the Shares on the over-the- counter market was $37.38 per Share. Holders are urged to obtain a current market quotation for the Shares. 7. Certain Information Concerning the Company. The Company. The information concerning the Company contained in this Offer to Purchase, including financial information, has been taken from or is based upon publicly available documents and records on file with the Commission and other public sources. Neither Parent nor the Purchaser assumes any responsibility for the accuracy or completeness of the information concerning the Company contained in such documents and records or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to Parent or the Purchaser. The Company, through Pathmark, operates 132 supermarkets. Pathmark's supermarkets are located in New Jersey, New York, Pennsylvania and Delaware and consist of approximately 5.2 million selling square footage and approximately 7.1 million total square footage. Of Pathmark's 132 stores, 129 are super centers, which are larger than the average size supermarket in the United States. Pathmark provides full pharmacy service in 127 of its 132 stores. As of January, 1999, the Company employed approximately 28,000 people, of whom approximately 20,500 were employed on a part-time 10 basis. The address of the Company's principal executive offices is 200 Milik Street, Carteret, New Jersey. The telephone number of the Company at such offices is (732) 499-3000. Corporate Structure. SMG-II owns all of the issued and outstanding shares of the capital stock of the Company other than the Shares. SMG-II, through the Company and PTK, owns all of the issued and outstanding shares of the capital stock of Pathmark. Capital Structure. The authorized capital of the Company consists of two classes of common stock and one class of preferred stock: (i) the Class A Common Stock, (ii) the Class B Common Stock and (iii) the Shares. (a) The Common Stock. Holders of the Class A Common Stock have voting rights. Holders of the Class B Common Stock do not have voting rights. The Purchaser has been informed that, as of March 9, 1999, there were issued and outstanding 650,675 shares of Class A Common Stock and 320,000 shares of Class B Common Stock, all of which shares of Class A Common Stock and Class B Common Stock were owned, as of March 9, 1999, by SMG-II. (b) The Shares. The Purchaser has further been informed that, as of March 9, 1999, there were 4,890,671 Shares issued and outstanding, and that no Shares were reserved for issuance upon the exercise of outstanding options granted under the Company's stock option plans or held in the Company's treasury. Rank. The Shares, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank senior to the common stock of the Company and will rank senior to any other stock issued by the Company. For so long as any Shares are outstanding, the Company may not authorize or issue any class or series of stock which ranks senior to the Shares without the affirmative vote of the holders of at least 66 2/3% of the outstanding Shares, voting as a separate class. Dividends. Holders of Shares are entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available therefor, dividends at the annual rate of $3.52 per share. Such dividends are cumulative and are payable quarterly. The terms of the Shares provide that dividends on the Shares may only be paid in cash. Accumulated unpaid dividends for any past dividend periods may be declared by the Board of Directors and paid on any date fixed by the Board of Directors, whether or not a regular dividend payment date, to holders of record on the books of the Company on such record date as may be fixed by the Board of Directors. Holders of Shares will not be entitled to any dividends, whether payable in cash, property or stock, in excess of the full cumulative dividends. No interest or sum of money in lieu of interest shall be payable in respect of any accumulated unpaid dividends. Redemption and Exchange. The Shares may be redeemed (to the extent the Company has funds legally available therefor) at any time, in whole or in part, at the Company's option, at $25 per share, together with all accrued and unpaid dividends to the date fixed for redemption; provided, however, that no partial redemptions of Shares may be made unless full cumulative dividends on all Shares for all past dividend periods shall have been paid. The Company must redeem on each of December 31, 2004, 2005 and 2006 an amount equal to at least 20% of the greatest number of Shares issued and outstanding at any time through December 31, 2004 at a redemption price of $25 per Share, plus all accrued and unpaid dividends to the date fixed for redemption. The Company may, at its option, receive a credit against its obligation to make these mandatory redemption payments in an amount equal to $25 for each Share previously acquired by the Company and surrendered for cancellation or optionally redeemed; provided that such amount was not previously so credited. In the event of partial redemptions of Shares, the Shares to 11 be redeemed will be determined by lot or pro rata as may be determined by the Board of Directors; provided, however, that the Board of Directors may redeem all Shares held by any holders of a number of Shares not to exceed 100 as may be specified by the Company. No partial optional redemptions of Shares may be made unless full cumulative dividends on all Shares shall have been paid or are contemporaneously declared and paid. On and after a redemption date, unless the Company defaults in the payment of the redemption price, dividends will cease to accrue on Shares called for redemption and all rights of holders of such Shares will terminate except for the right to receive the redemption price. Shares will be exchangeable, at the Company's option, on any dividend payment date, in whole or in part (in minimum increments of $25 million in aggregate liquidation preference amount or integral multiples of $1 million in excess of $25 million or any lesser amount then outstanding), for exchange debentures having an aggregate principal amount equal to the total of $25 for each full Share exchanged, plus an amount equal to all accrued but unpaid dividends payable on such Share (at the rate of $1 principal amount of such exchange debentures for each $1 of such accrued but unpaid dividends), with a cash payment to be made in lieu of the issuance of fractional securities. In the event such exchange would result in the issuance of an exchange debenture in a principal amount which is less than $1,000 or which is not an integral multiple of $1,000, each holder of Shares otherwise entitled to principal amounts less than $1,000 of exchange debentures otherwise issuable upon exchange of the Shares will be entitled to receive a cash payment in lieu thereof equal to such person's proportionate interest in the net proceeds from the sale or sales in the open market of the aggregate of all fractional principal amounts each holder would otherwise have been entitled to receive in exchange debentures. In the event of partial exchanges of exchange debentures for Shares, the Shares to be exchanged will be determined by lot or pro rata as may be determined by the Board of Directors, provided that the Board of Directors may exchange all Shares held by holders of a number of Shares not to exceed 100 as may be specified by the Company. On the date fixed for exchange, the rights of holders of the Shares exchanged shall cease, except the right to receive the exchange debentures in exchange for such Shares and cash or additional exchange debentures in payment of accrued but unpaid dividends on such Shares to the date of exchange. Liquidation Preference. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, holders of Shares will be entitled to receive an amount per Share equal to $25, plus any accrued and unpaid dividends thereon to the date fixed for such liquidation, dissolution or winding up, before any distribution is made on any common stock of the Company. If the assets of the Company are not sufficient to pay the amounts payable with respect to the Shares in full, the holders of the Shares will share ratably in any distribution of assets of the Company in proportion to the full liquidation preferences to which each is entitled. After payment of the full amount of the liquidation preference to which they are entitled, the holders of Shares will not be entitled to any further participation in any distribution of assets of the Company. However, neither the voluntary sale, conveyance, exchange or transfer (for cash, shares of stock, securities, or other consideration) of all or substantially all of the property or assets of the Company, nor the consolidation or merger of the Company shall be deemed to be a voluntary or involuntary liquidation, dissolution or winding up of the Company, unless such voluntary sale, conveyance, exchange or transfer shall be in connection with a plan of liquidation, dissolution or winding up of the Company. There is no requirement that funds be set aside to protect the liquidation preference of the Shares, although such liquidation preference will be substantially in excess of the par value of such Shares. There are no restrictions upon the surplus of the Company solely because the liquidation preference of the Shares exceeds the par value, and there are no remedies available to holders of the Shares before or after the payment of any dividend, other than in connection with the liquidation of the Company, solely by reason of the fact that such dividend would reduce the surplus of the Company to an amount less than the liquidation preference of the Shares. 12 Voting Rights. Holders of the Shares have no voting rights except as provided by law or as set forth below. In the event that six full quarterly dividends (whether or not consecutive) on the Shares are in arrears, in whole or in part, or if the Company shall have failed to fulfill any mandatory redemption obligation with respect to the Shares for a period of 30 days, the Board of Directors will be (and, as of the date of the Offer, has been) increased by two directors, and the holders of Shares, voting as a class, will be entitled to elect (and, as of the date of the Offer, have elected) the additional directors to the expanded Board of Directors. Such voting right will continue until such time as all dividends accumulated on the Shares are paid in full and the Company has fulfilled its mandatory redemption obligation. Any directors elected to the Board of Directors by the holders of the Shares will serve one-year terms (or until their successors have been elected and qualified), subject to termination in the event that the Company has paid all accumulated dividends or fulfilled its mandatory redemption obligations, as the case may be. Under the DGCL, holders of Shares have the power to vote, as a class, on any amendment to the Company's certificate of incorporation which increases or decreases the par value of the Shares. The Company may not (a) amend, alter or repeal any of the provisions of the Company's certificate of incorporation or the by-laws of the Company so as to affect adversely the voting powers, preferences or rights of the holders of the Shares (except that the authorization or creation, or the increase in the authorized amount, of common stock or any shares of any class ranking on parity with the Shares shall not be deemed to affect adversely the voting powers, preferences or rights of the holders of the Shares), (b) amend, modify or repeal any of the provisions of the exchange debenture indenture, except for such amendments as would be permitted under the terms of the exchange debenture indenture without the consent of any holders of the exchange debentures, or (c) authorize or create, or increase the authorized amount of, any senior securities of any class or any security convertible into senior securities of any class; in each case, without the vote or consent of the holders of at least 66 2/3% of the Shares then outstanding, given in person or by proxy, either in writing or at a meeting, voting or consenting separately as a class. In addition, the Company shall not authorize, create or increase the authorized amount of any stock of any class or any security convertible into or exchangeable for any shares of securities ranking on a parity with the Shares without the vote or consent of the holders of at least a majority of the Shares then outstanding, given in person or by proxy, either in writing or at a meeting, voting or consenting separately as a class. However, the voting provisions described in the preceding two sentences do not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding Shares shall have been redeemed and sufficient funds shall have been set aside or deposited in trust by the Company to effect such redemption. Financial Information. Set forth below is certain selected consolidated financial information relating to the Company and its subsidiaries which has been excerpted or derived from the financial statements contained in the Company's Annual Reports on Form 10-K for the fiscal years ended January 31, 1998 and February 1, 1997. More comprehensive financial information is included in these reports and other documents filed by the Company with the Commission. The financial information that follows is qualified in its entirety by reference to these reports and other documents, including the financial statements and related notes contained therein. These reports and other documents may be inspected at, and copies may be obtained from, the same places and in the manner set forth below under "Available Information". 13 SUPERMARKETS GENERAL HOLDINGS CORPORATION SELECTED CONSOLIDATED FINANCIAL DATA
39 weeks ended(1) 52 weeks ended(2) ----------------------- ----------------------- October 31, November 1, January 31, February 1, 1998 1997 1998 1997 ----------- ----------- ----------- ----------- (in millions) Income Statement Data: Sales........................ $2,739 $2,755 $3,696 $3,711 Cost of sales ............... 1,958 1,985 2,652 2,620 Gross profit................. 781 770 1,044 1,091 Depreciation and amortization................ 59 62 84 89 Operating earnings (3)....... 96 78 119 127 Net loss (4)................. (25) (36) (57) (20) Less: non-cash preferred stock accretion and dividend requirements................ (14) (14) (19) (19) Net loss attributable to common stockholders (5)............ (39) (50) (76) (39) EBITDA-FIFO (6).............. 154 142 202 237 Balance Sheet Data (at period end): Total assets................. $ 874 $ 957 $ 908 $1,017 Working capital deficiency... 59 113 107 176 Obligations under capital leases (7) ................. 187 192 195 199 Long-term debt (7)........... 1,286 1,307 1,252 1,288 Cumulative exchangeable redeemable preferred stock.. 109 107 107 105 Stockholder's deficiency..... (1,373) (1,308) (1,334) (1,258)
- -------- (1) The consolidated financial information for the 39 week periods ended October 31, 1998 and November 1, 1997 are unaudited. (2) The Company's fiscal year ends on the Saturday nearest to January 31 of the following calendar year. (3) Operating earnings in the 52 weeks ended February 1, 1997 is net of a restructuring charge of $9 million and a lease commitment charge of $9 million. (4) Net loss includes a loss on early extinguishment of debt of $8 million in the 39 weeks ended November 1, 1997, $8 million in the 52 weeks ended January 31, 1998 and $1 million in the 52 weeks ended February 1, 1997. (5) On February 4, 1991, the Company became a wholly-owned subsidiary of SMG- II through the consummation of an exchange offer whereby the then existing stockholders exchanged on a one-for-one basis shares of the Company's common stock for shares of common stock of SMG-II. Since the Company is a wholly-owned subsidiary, earnings (loss) per share information is not presented. (6) EBITDA-FIFO represents net earnings before interest expense, income taxes, depreciation, amortization, the sale of real estate, the LIFO charge (credit) and unusual transactions. EBITDA-FIFO is a widely accepted financial indicator of a company's ability to service and/or incur debt but should not be construed as an alternative to, or a better indicator of, operating income or cash flows from operating activities, as determined in accordance with generally accepted accounting principles. (7) Including current maturities. 14 Available Information. The Company is subject to the information and reporting requirements of the Exchange Act and is required to file reports and other information with the Commission relating to its business, financial condition and other matters. Information, as of particular dates, concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities, any material interests of such persons in transactions with the Company and other matters is required to be disclosed in reports filed with the Commission. These reports and other information should be available for inspection at the public reference facilities of the Commission located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and also should be available for inspection and copying at prescribed rates at regional offices of the Commission located at Seven World Trade Center, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of this material may also be obtained by mail, upon payment of the Commission's customary fees, from the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Electronic filings filed through the Commission's Electronic Data Gathering, Analysis and Retrieval system ("EDGAR"), including those made by or in respect of the Company, are publicly available through the Commission's home page on the Internet at http://www.sec.gov. Certain Projections for the Company. In connection with the negotiation and execution of the SMG-II Merger Agreement, the Company made available to Parent and the Purchaser certain non- public information concerning Pathmark, including certain projected financial information (the "Projections") for fiscal years ending January 30, 1999 through February 1, 2003. The Company does not in the ordinary course publicly disclose projections as to future sales, earnings or other income statement data, and the Projections were not prepared with a view to public disclosure. The Company has advised Parent and the Purchaser that the Projections were prepared by Pathmark's management based on numerous assumptions including, among others, projections of revenues, gross profit, operating and other expenses, depreciation and amortization, capital expenditure and working capital requirements. The Projections do not give effect to the Offer or the potential combined operations of Parent and the Company. Such information is set forth below in this Offer to Purchase for the limited purpose of giving the Company's stockholders access to financial projections prepared by Pathmark's management that were made available to Parent and the Purchaser in connection with the SMG-II Merger Agreement and the Offer. PATHMARK STORES, INC. PROJECTED FINANCIAL PERFORMANCE
Quarterly Operating Plan Long Range Plan-- 1999(1) Fiscal Years(1) ---------------------------------- ---------------------- Annual Operating Estimated Plan Fiscal First Second Third Fourth Fiscal Year Quarter Quarter Quarter Quarter Year 1998(1) 1999 1999 1999 1999 1999(1) 2000 2001 2002 ----------------------------- ------- ------- --------- ------ ------ ------ (In millions) Income Statement Data: Sales.................... $ 3,660 $902 $921 $926 $963 $3,712 $3,907 $4,139 $4,381 Cost of sales............ 2,612 643 658 666 683 2,650 2,788 2,958 3,132 --------- ------ ------ ------ ------ ------ ------ ------ ------ Gross profit............. 1,048 259 263 260 280 1,062 1,119 1,181 1,249 Depreciation and amortization............ 78 18 19 19 19 75 78 82 86 Operating earnings....... 132 29 32 28 43 132 149 156 174 Net earnings (loss)...... (29) (11) (9) (13) 2 (31) (19) (20) 4 EBITDA-FIFO.............. 210 50 52 48 63 213 233 244 265 Balance Sheet Data (at period end): Total assets............. $826 $834 $851 $864 $862 $862 $910 $964 $1,019 Obligations under capital leases (2).............. 188 197 211 205 206 206 219 229 238 Long-term debt (2)....... 1,279 1,305 1,314 1,315 1,329 1,329 1,384 1,439 1,472 Stockholder's deficiency.............. (1,133) (1,144) (1,153) (1,166) (1,164) (1,164) (1,183) (1,203) (1,199)
- -------- (1) Pathmark's fiscal year ends on the Saturday nearest to January 31 of the following calendar year. Fiscal years presented consist of 52 weeks, except for 53 weeks in fiscal 2000. Fiscal quarters presented consist of 13 weeks. (2) Including current maturities. 15 CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS Certain matters discussed herein are forward-looking statements that involve risks and uncertainties. Forward-looking statements include the information set forth above in "Certain Projections for the Company". Such information has been included in this Offer to Purchase for the limited purpose of giving the Company's stockholders access to financial projections prepared by Pathmark's management that were made available to Parent and the Purchaser. Such information was prepared by the Company's management for internal use and not with a view to publication. The Projections were based on assumptions concerning Pathmark's business prospects in 1998 through 2002, including the assumption that the Company would continue to operate under the same ownership structure as then existed. The Projections were also based on certain reserve and operating assumptions and also the assumption that no refinancing would have occurred, although one would be necessary. While presented with numerical specificity, the Projections were prepared by the Company in the ordinary course, and are based upon a variety of estimates and hypothetical assumptions, which may not be accurate, may not be realized, and are also inherently subject to significant business, economic and competitive uncertainties and contingencies, all of which are difficult to predict, and most of which are beyond the control of the Company. Accordingly, there can be no assurance that any of the Projections will be realized and the actual results for the fiscal years 1999, 2000, 2001 and 2002 may vary materially from those shown above. In addition, the Projections were not prepared in accordance with generally accepted accounting principles, and neither the Company's nor Parent's independent accountants have examined or compiled any of the Projections or expressed any conclusion or provided any other form of assurance with respect to the Projections and accordingly assume no responsibility for the Projections. The Projections were prepared with a limited degree of precision, and were not prepared with a view to public disclosure or compliance with the published guidelines of the Commission or the guidelines established by the American Institute of Certified Public Accountants regarding projections, which would require a more complete presentation of data than as shown below. The inclusion of the Projections herein should not be regarded as a representation by the Company, Parent and the Purchaser or any other person that the projected results will be achieved. The Projections should be read in conjunction with the historical financial information of the Company included above. None of Parent, Purchaser, Croesus, Ahold U.S.A., the Company or any other person assumes any responsibility for the accuracy or validity of the foregoing Projections. Forward-looking statements also include those preceded by, followed by or that include the words "believes", "expects", "anticipates" or similar expressions. Such statements should be viewed with caution. 8. Certain Information Concerning the Purchaser, Ahold U.S.A., Croesus and Parent. The Purchaser. The Purchaser, a newly incorporated Delaware corporation, has not conducted any business other than in connection with the Offer, the SMG-II Merger Agreement and the Alternative Stock Purchase Agreement. All of the issued and outstanding shares of capital stock of the Purchaser are beneficially owned by Ahold U.S.A. The principal address of the Purchaser is 1013 Center Road, Wilmington, Delaware 19805. The telephone number of the Purchaser at such office is (800) 927-9800. Ahold U.S.A. and Croesus. Croesus, a Delaware corporation, is an indirect wholly-owned subsidiary of Parent and the indirect owner of the Purchaser. Croesus is the direct owner of Ahold U.S.A., which in turn coordinates Parent's operations in the United States. Through acquisitions and internal growth, Ahold U.S.A. has established itself as a leading food retailer in the United States. Ahold U.S.A. operates 895 supermarkets (including seven franchise stores) in fifteen states and in the District of Columbia. Ahold U.S.A. has organized Parent's United States operations into five independently-managed operating companies, each operating in a distinct geographic region: The Stop & Shop Companies, Inc., which operates 193 stores in Massachusetts, Connecticut, New York and Rhode Island; Giant Food Stores, Inc., which operates 149 supermarkets in Pennsylvania, 16 Virginia, West Virginia, Maryland, New Jersey, Long Island and the metropolitan New York City area; BI-LO Inc., which operates 266 supermarkets in North and South Carolina, Tennessee and Georgia; Tops Markets, Inc., which operates 114 supermarkets in western New York, northwestern Pennsylvania and the northeastern Ohio area; and Giant Food Inc., which operates 173 supermarkets in Washington, D.C., Maryland, Virginia, Delaware, New Jersey and Pennsylvania. Prior to its acquisition by Parent in October 1998, Giant Food Inc. was not related to Giant Food Stores, Inc. The principal address of Ahold U.S.A. is One Atlanta Plaza, East Paces Ferry Road, Suite 2575, Atlanta, Georgia 30326. The telephone number of Ahold U.S.A. at such offices is (404) 262-6050. The principal address of Croesus is 913 N. Market St., Suite 209, Wilmington, Delaware 19801. The telephone number of Croesus at such offices is (302) 576-2889. Parent. Parent is a public company with limited liability incorporated under the laws of The Netherlands with its corporate seat in Zaandam (municipality Zaanstad), The Netherlands, with interests in food retailing in The Netherlands, various other European countries, the United States, several countries in Asia and in several countries in Latin America. Parent's common shares are listed on the AEX-Stock Exchange and the Swiss Exchange. American Depositary Shares representing Parent's common shares trade on the New York Stock Exchange under the symbol "AHO". The principal executive offices of Parent are located at Albert Heijnweg 1, 1507 EH Zaandam, The Netherlands. The telephone number of Parent at such offices is 011-31-75-659-5648 (Investor Relations). Parent is subject to the informational and reporting requirements of the Exchange Act applicable to foreign private issuers and is required to file reports and other information with the Commission relating to its business, financial condition and other matters. Additional information concerning Parent is set forth in Parent's Annual Report on Form 20-F for the fiscal year ended December 28, 1997 (the "Parent Annual Report") and other reports filed with the Commission, which may be inspected at, and copies may be obtained from, the same places and in the manner set forth with respect to information concerning the Company in Section 7--"Certain Information Concerning the Company" (except that since such reports are not filed through EDGAR, they are not publicly available through the Commission's home page). Set forth below are certain selected consolidated financial data with respect to Parent and its consolidated subsidiaries for Parent's last three fiscal years (collectively, the "Parent Financial Statements"), excerpted or derived from the Parent Annual Report. The financial information set forth below is derived from, and should be read in conjunction with, and is qualified entirely by reference to, the Parent Financial Statements and notes thereto prepared in accordance with Item 18 of Form 20-F and included in the Parent Annual Report filed with the Commission, which is incorporated herein by reference. The Parent Financial Statements and related notes may be inspected at, and copies may be obtained from, the same places and in the manner set forth in Section 7--"Certain Information Concerning the Company" (except that since such reports are not filed through EDGAR, they are not publicly available through the Commission's home page). The Parent Financial Statements are presented in Dutch Guilders ("Guilders" or "NLG") and are prepared in accordance with accounting principles generally accepted in The Netherlands ("Dutch GAAP"), which (as described below) differ in certain respects from generally accepted accounting principles in the United States ("U.S. GAAP"). In addition, as a significant portion of Parent's business is based in the United States, exchange rate fluctuations between the Guilder and the Dollar are among the factors influencing year-to-year comparability of consolidated earnings and equity. The weighted average rate of the Guilder per Dollar utilized in the Parent Financial Statements was NLG 1.95 and NLG 1.69 for the fiscal years ended December 28, 1997 and December 29, 1996, respectively. The year-end rates of the Guilder per Dollar used in the preparation of the Parent Financial Statements as of December 28, 1997 and December 29, 1996 were NLG 2.00 and NLG 1.75, respectively. The rates used in the preparation of the Parent Financial Statements may vary in certain minor respects from the rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York (the "Noon Buying Rate"). As of March 12, 1999, the Noon Buying Rate was NLG 2.01 = U.S. $1.00. No representation is made that Guilders have been, could have been or could be converted into Dollars at that or any other rate. 17 KONINKLIJKE AHOLD N.V. SELECTED CONSOLIDATED FINANCIAL DATA
Fiscal year ------------------------- 1997 1996 ------------ ------------ (in millions of Guilders, except per share amounts) Consolidated Earnings Data Amounts in accordance with Dutch GAAP: Sales.......................................... 50,568 36,538 Net earnings(1)................................ 934 632 Net earnings per common share(2)............... 1.74 1.38 Approximate amounts in accordance with US GAAP: Net earnings(1)................................ 712 517 Diluted net earnings per common share(3)....... 1.31 1.12 December 28, December 29, 1997 1996 ------------ ------------ (in millions of Guilders) Consolidated Balance Sheet Data Amounts in accordance with Dutch GAAP: Total assets................................... 18,839 14,870 Long term borrowings(4)........................ 5,410 4,344 Stockholders' equity........................... 3,089 2,417 Approximate amounts in accordance with US GAAP: Total assets................................... 25,507 20,565 Stockholders' equity........................... 9,593 8,114
- -------- (1) Before dividends on Cumulative Preferred Financing Shares. (2) Net earnings per common share is based on net earnings, after dividends on preferred shares, divided by the weighted average number of common shares outstanding as retroactively adjusted for stock splits and stock dividends. (3) Diluted net earnings per common share is based on net earnings after dividends on preferred shares divided by the weighted average number of diluted common shares outstanding, as adjusted for stock splits and stock dividends. (4) Includes long-term debt and the long-term portion of capitalized lease commitments. The differences between Dutch GAAP and U.S. GAAP which materially affect Parent's reported net earnings and stockholders' equity are explained below. Goodwill: Under Dutch GAAP, the amount of goodwill included in the price of acquired companies is deducted from stockholders' equity (and minority interest when applicable) in the year of acquisition. Under U.S. GAAP, goodwill is capitalized and amortized over the estimated life, not to exceed 40 years. Pension cost: Under Dutch GAAP, pension costs are based on actual computed contributions to foundations. Under U.S. GAAP, pension costs are computed in accordance with the provisions of Statement of Financial Accounting Standard No. 87, "Employer's Accounting for Pensions" and include current service costs, interest costs and amortization of prior service costs. Revaluation of Ahold Vastgoed bv: Under Dutch GAAP, the assets of Ahold Vastgoed bv, a real estate subsidiary of Parent were revalued on October 10, 1988. The resulting unrealized gain (net of taxes) was added to the revaluation reserve, which is part of stockholders' equity. Upon selling revalued real estate, the relevant part of the revaluation reserve is considered realized and transferred 18 to the respective company's statement of earnings. The revaluation amount is depreciated over the life of the related asset. Such one-time revaluations are not allowed under U.S. GAAP. Recent Developments. On March 9, 1999, Parent announced the results for its 53-week fiscal year ended January 3, 1999. For such fiscal year, Parent reported consolidated net earnings of NLG 1,206 million on total sales of NLG 58,364 million, consolidated net earnings per common share of NLG 2.06, consolidated total assets of NLG 25,180 million, consolidated long-term borrowings of NLG 8,646 million and stockholders' equity of NLG 3,422 million. During the last five years, none of Parent, Croesus, Ahold U.S.A., the Purchaser or to the best of their knowledge, any of the persons listed in Schedule I hereto (i) has been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. Except as described in this Offer to Purchase (i) none of Parent, Croesus, Ahold U.S.A., the Purchaser or to the best of their knowledge, any of the persons listed in Schedule I to this Offer to Purchase or any associate or majority-owned subsidiary of Parent, Croesus, Ahold U.S.A., or the Purchaser beneficially owns or has any right to acquire, directly or indirectly, any equity securities of the Company and (ii) none of Parent, Croesus, Ahold U.S.A., the Purchaser or to the best of their knowledge, any of the persons or entities referred to above or any director, executive officer or subsidiary of any of the foregoing has effected any transaction in such equity securities during the past 60 days. The Purchaser and Parent disclaim beneficial ownership of any Shares owned by any pension plans of Parent or the Purchaser or any affiliate of Parent or the Purchaser. Except as described in this Offer to Purchase, none of Parent, Croesus, Ahold U.S.A., the Purchaser or to the best of their knowledge, any of the persons listed in Schedule I to this Offer to Purchase has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or voting of such securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies. Except as set forth in this Offer to Purchase, since November 26, 1998, none of Parent, Croesus, Ahold U.S.A., the Purchaser or to the best of their knowledge, any of the persons listed on Schedule I hereto has had any business relationship or transaction with the Company or any of its executive officers, directors or affiliates that is required to be reported under the rules and regulations of the Commission applicable to the Offer. Except as set forth in this Offer to Purchase, since November 26, 1998, there have been no contacts, negotiations or transactions between any of Parent, Croesus, Ahold U.S.A., the Purchaser or any of their subsidiaries or, to the best knowledge of Parent, Croesus, Ahold U.S.A., or the Purchaser, any of the persons listed in Schedule I to this Offer to Purchase, on the one hand, and the Company or its affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. 9. Source and Amount of Funds. The Offer is not conditioned upon any financing arrangements. The amount of funds required by the Purchaser to purchase all of the outstanding Shares pursuant to the Offer, to consummate each of the SMG-II Merger and the Company Merger and to pay related fees and expenses is expected to be approximately $245 million. The Purchaser intends to obtain such funds primarily from a capital contribution by Ahold U.S.A., which in turn will obtain such funds from either a capital contribution by, or a loan from, Croesus. Croesus currently expects to obtain the necessary funds for such capital contribution or for such loan from cash on hand. To the extent that cash on hand is not sufficient, Croesus intends to borrow under an Amended and Restated U.S. $1.0 billion Multicurrency Revolving Credit Facility Agreement (the "Credit Facility"), 19 dated December 18, 1996, and amended and restated September 7, 1998, by and between Parent, Croesus (formerly known as Ahold U.S.A.), ABN AMRO Bank N.V., Chase Investment Bank Limited and J.P. Morgan Securities Ltd. as Arrangers, The Chase Manhattan Bank as Facility, Swing-Line, Letter of Credit and Short Term Advances Agent, Chase Manhattan International Limited as Multicurrency Facility Agent and certain financial institutions named therein. The Credit Facility provides for an unsecured loan facility in an aggregate amount of up to U.S.$1.0 billion. The Credit Facility expires on December 18, 2003. The Credit Facility may be used by Parent for general corporate purposes including working capital and the refinancing of certain other facilities and the amounts available for borrowing under the Credit Facility vary from time to time. Revolving credit advances under the Credit Facility will bear interest at a rate per annum equal to LIBOR plus 10 basis points. The Credit Facility contains certain restrictions on, among other things, the creation of liens and certain financial covenants which require Parent to maintain a specified ratio of operating earnings before income taxes plus net interest expense to net interest expense. The Credit Facility also contains certain events of default including (i) the liquidation or bankruptcy of Parent or any of its material subsidiaries, (ii) changes in the character of its business and (iii) the lease, sale or disposition of all or any substantial part of its assets. In addition, Parent has agreed to pay the Chase Manhattan Bank certain fees and to reimburse each of the agents and arrangers for certain expenses and to provide certain indemnities, as is customary for commitments of the type described therein. The foregoing summary of the Credit Facility is qualified in its entirety by reference to the text of the Credit Facility, a copy of which has been filed as an exhibit to the Tender Offer Statement on Schedule 14D-1 relating to the Offer which the Purchaser has filed with the Commission (the "Schedule 14D-1"). The Credit Facility may be inspected at, and copies may be obtained from, the same places and in the manner set forth in Section 7--"Certain Information Concerning the Company". The margin regulations promulgated by the Federal Reserve Board place restrictions on the amount of credit that may be extended for the purposes of purchasing margin stock if such credit is secured directly or indirectly by margin stock. The Purchaser believes that the financing of the acquisition of the Shares will be in full compliance with, or not subject to, the margin regulations. In addition, based on publicly available information, Parent estimates that approximately an additional $1.3 billion may be necessary to repay or purchase existing long-term indebtedness of the Company which becomes due and payable during the period from the consummation of the Offer and the SMG-II Merger until the 90th day after consummation of the Offer and the SMG-II Merger. Parent believes it will be able to renegotiate or refinance such indebtedness on satisfactory terms. Parent currently is considering financing a portion of such indebtedness through an equity offering and to refinance the balance of such indebtedness through the incurrence of debt. 10. Background of the Offer. On April 15, 1997, Mr. Zwartendijk, at the time the President and Chief Executive Officer of Ahold U.S.A. and Mr. Allan S. Noddle, at the time the Chief Executive Officer of Ahold U.S.A. Support Services, Inc., met with Mr. James L. Donald, the President and Chief Executive Officer of Pathmark, in New York City to discuss a possible acquisition by Parent, in whole or in part, of Pathmark, but concluded that such acquisition was not feasible in the near future. On the following day, Messrs. Zwartendijk and Noddle discussed the same issue with representatives of Merrill Lynch Capital Partners, in their capacity as majority shareholders of SMG-II, and reached the same conclusion. On November 26, 1998, Mr. A. Michael Meurs, the Chief Financial Officer of Parent, had a telephone conversation with a representative of Merrill Lynch & Co., in its capacity as financial advisor to SMG-II ("Merrill Lynch"), in which Mr. Meurs, on behalf of Parent, expressed an interest in acquiring Pathmark. 20 Parent has been informed that in December of 1998, management of Pathmark and Merrill Lynch began contacting a number of potential buyers regarding a potential sale of SMG-II and that some of the potential buyers executed confidentiality agreements with SMG-II and received confidential information regarding Pathmark. During the three day period commencing on December 3, 1998, Mr. Robert G. Tobin, an Executive Vice President of Parent, had several meetings with Mr. Donald in Carlsbad, California to discuss a possible acquisition of Pathmark by Parent. On December 17, 1998, a representative of Merrill Lynch gave a presentation about Pathmark to executives of Parent at its corporate head office in Zaandam, The Netherlands. On December 30, 1998, Parent and SMG-II signed a confidentiality agreement regarding information to be made available to Parent, its affiliates, representatives and agents in connection with the evaluation of a proposed acquisition of Pathmark. On January 4, 1999, Mr. Donald met with Mr. Tobin to discuss various aspects of Parent's operations. On January 18, 1999, representatives of Merrill Lynch gave another presentation to executives of Parent in Zaandam, The Netherlands about the capitalization and financial condition of Pathmark and its parent holding companies. On January 24, 1999, Mr. William Grize, the President and Chief Executive Officer of The Stop & Shop Companies, Mr. Cees H. van der Hoeven, the President and Chief Executive Officer of Parent, and Mr. Tobin met with Mr. Donald at a trade conference in Orlando, Florida and discussed a proposed acquisition of Pathmark by Parent. Mr. Van der Hoeven gave Mr. Donald an overview of Parent's worldwide strategy. He explained the vision of building a collective group of best-of-breed companies, supported by the global network of internal benchmarking, best practice and knowledge transfer. Mr. Tobin also explained to Mr. Donald Parent's strategy in the United States and together with Mr. Grize, discussed the Stop & Shop acquisition which took place in 1996 and advantages of belonging to the worldwide operations of Parent. At the end of this meeting, Mr. Tobin delivered a non-binding letter of interest to Mr. Donald proposing to purchase all of the capital stock of Pathmark from PTK for an aggregate purchase price of approximately $200 million, payable at Parent's option in cash or in Parent stock, and the assumption of the existing indebtedness of Pathmark. During the week of January 25, 1999, Parent, its counsel and other agents conducted a due diligence review of Pathmark in New Jersey. On February 5, 1999, Mr. Donald countersigned, on behalf of Pathmark, a limited exclusivity letter prepared by Parent, pursuant to which Pathmark agreed, until February 18, 1999, not to solicit additional bids for the purchase of Pathmark, to inform Parent of the release of information concerning Pathmark to existing potential purchasers and not to engage in negotiations regarding the terms and conditions of a purchase of Pathmark with any existing potential purchasers. Pathmark further agreed that if, on or prior to February 18, 1999, Parent delivered a draft of an acquisition agreement containing reasonable and customary terms, Pathmark would, effective from the date of such delivery, also cease to provide further information to existing potential purchasers until March 1, 1999. On February 9, 1999, SMG-II's counsel communicated to Parent and its counsel that, due to tax and regulatory considerations, SMG-II preferred to consummate the sale of Pathmark through the purchase by Parent of the capital stock of SMG-II. SMG-II's counsel informed Parent and its counsel that this structure would result in significantly greater after-tax returns available for distribution to both the holders of Shares and to the holders of SMG-II's capital stock. Parent voiced its strong 21 objections to this change in the transaction structure at that time. On the following day, SMG-II's counsel distributed a memorandum to Parent and its counsel which, among other things, proposed that Parent acquire the capital stock of SMG-II in return for cash and that SMG-II make a tender offer for the Shares. On February 15, 1999, Mr. Meurs, in a teleconference with a representative of Merrill Lynch, confirmed Parent's willingness to acquire the capital stock of SMG-II and the Shares instead of the capital stock of Pathmark, on the condition that SMG-II or its stockholders make the tender offer for the Shares prior to such acquisition. Parent also conditioned the acceptance of the new acquisition structure upon the acquisition in the tender offer of at least 66 2/3% of the Shares. Parent further advised Merrill Lynch that it would be the sole responsibility of SMG-II and the Company to determine the allocation of the purchase price among the stockholders of SMG-II and the holders of the Shares. Parent also advised Merrill Lynch that, while it was amenable to the changed structure, it would only proceed if PTK agreed to sell Pathmark in the event the tender offer was not successful, in order to provide greater deal certainty to Parent. Parent also informed Merrill Lynch that it would proceed with the changed structure only if shareholders of SMG-II holding such number of shares of the capital stock of SMG-II as is necessary to approve the SMG-II Merger Agreement would enter into an agreement with Parent whereby they agree to vote their shares of the capital stock of SMG-II in favor of the SMG-II Merger and also grant an option to Parent to purchase such shares under certain circumstances. In addition, Mr. Meurs informed Merrill Lynch and SMG- II of a possible downward adjustment to the purchase price in the amount of $40,000,000 as a result of Parent's due diligence. On February 16, 1999, Mr. Marc A. Strassler, Senior Vice President, Secretary and General Counsel of SMG-II, sent a notice to Mr. Van der Hoeven, informing the latter of continuing discussions with other potential bidders concerning the sale of Pathmark (as permitted by the exclusivity agreement). On February 18, 1999, Mr. Meurs and representatives of Merrill Lynch discussed in a telephone conference the impact of the various transaction fees to be paid by Pathmark on the purchase price. Mr. Meurs informed Merrill Lynch that Parent was considering a further reduction of the purchase price by $10,000,000. During this telephone call, the parties agreed to commence negotiation of the documentation for the proposed transaction. On February 23, 1999, counsel for Parent delivered the initial drafts of the transaction documents. The initial structure proposed in such documents was a purchase of the stock of SMG-II from the holders of the capital stock of SMG- II, with survival of representations and warranties and the holders of capital stock of SMG-II indemnifying Parent for breach of their representations and warranties. SMG-II, Merrill Lynch and SMG-II's counsel voiced strong objections to such a structure and informed Parent that due to the fact that both the Company and Pathmark are reporting companies and that SMG-II has 83 stockholders, SMG-II would be willing to enter only into a "public company type" merger agreement with no survival of representations and indemnification obligations. On March 2, 1999, counsel for Parent delivered revised drafts of the transaction documentation reflecting a "public company merger" structure to SMG-II, Merrill Lynch and counsel for SMG-II and negotiations commenced shortly thereafter. On March 4, 1999, a representative of Merrill Lynch and Mr. Meurs had a telephone conversation during which they discussed structural issues in connection with the acquisition. Mr. Meurs agreed that Parent, through the Purchaser, would make the tender offer for the Shares. On March 7, 1999, a teleconference was held among Mr. Meurs, certain other executives of Parent and representatives of Merrill Lynch in which Merrill Lynch confirmed that the Board of Directors of each of SMG-II, the Company and PTK was scheduled to meet on March 8, 1999 to consider and 22 take action on any proposals regarding the sale of SMG-II. Merrill Lynch advised that it expected such boards of directors to consider several competing bids. On March 8, 1999, Mr. Meurs and certain other executives of Parent called representatives of Merrill Lynch to inform them of Parent's decision to increase the proposed purchase price to $250,000,000. The same was later confirmed in writing by Mr. Meurs. A meeting of the Board of Directors of each of SMG-II, the Company and PTK was held on March 8, 1999 to consider the proposed transaction and to evaluate the bids made in connection with the proposed transaction. At such meeting the Board of Directors of SMG-II reviewed, with the advice and assistance of Merrill Lynch and its counsel, the terms and conditions of the proposed transactions and the bids and transaction documents submitted in connection therewith. After such review, the Board of Directors of SMG-II approved the bid submitted by Parent. Shortly thereafter, the Board of Directors of the Company reviewed the proposed terms of the Offer and the Company Merger. At such meeting, the full board of directors (including the two directors nominated by the holders of Shares) debated the allocation of the overall purchase price among the holders of the Shares and the SMG-II Stockholders and thereafter agreed on the Offer Price. On March 8, 1999, a representative of Merrill Lynch called Mr. Meurs to inform Parent that the offer of Parent was accepted and that the board of directors of each of SMG-II and the Company had agreed on an allocation of the purchase price among the holders of the Shares and the SMG-II Stockholders, after deductions for a certain "stay put" bonus to be paid to Mr. Donald pursuant to the sale and transition agreement with Mr. Donald. Following approval by the board of directors of each of SMG-II, the Company and PTK, the SMG-II Merger Agreement and the Stock Purchase Agreement, by and among Parent, the Purchaser and PTK were executed and delivered on March 9, 1999. SMG-II Stockholders holding sufficient number of shares to approve the SMG-II Merger, Parent and the Purchaser executed and delivered the Stockholders Agreement on March 9, 1999. The transaction was publicly announced through a joint press release by Parent and SMG-II on March 9, 1999. 11. Purpose of the Offer; Plans for the Company; Certain Agreements. Purpose of the Offer. The purpose of the Offer, the SMG-II Merger and the Company Merger is, collectively, to enable Parent to acquire the entire equity interest in SMG-II, the Company, PTK and Pathmark. Upon consummation of the SMG-II Merger, the Company will become an indirect wholly-owned subsidiary of each of Parent and Croesus and a direct wholly-owned subsidiary of Ahold U.S.A. In the event that the Minimum Condition is not satisfied or waived, the Purchaser will acquire the entire equity interest of Pathmark. Upon consummation of the transactions contemplated by the Alternative Stock Purchase Agreement, Pathmark would become a wholly-owned subsidiary of the Purchaser and an indirect wholly-owned subsidiary of each of Parent and Croesus. Plans for the Company. It is currently expected that, initially following the SMG-II Merger and the Company Merger (or, alternatively, the consummation of transactions contemplated by the Alternative Stock Purchase Agreement), the business and operations of each of the Company and Pathmark will generally continue as each of them is currently being conducted, except that Parent anticipates integrating its Edwards supermarkets in New Jersey, New York City and Long Island into Pathmark. Parent currently intends to cause Pathmark's operations to continue to be run and managed by Pathmark's existing executive officers. Parent will continue to evaluate all aspects of the business, operations, capitalization and management of Pathmark during the pendency of the Offer and after the 23 consummation of the Offer, the SMG-II Merger and the Company Merger and will take such further actions as it deems appropriate under the circumstances then existing. Parent intends to seek additional information about Pathmark during this period. Thereafter, Parent intends to review such information as part of a comprehensive review of Pathmark's business, operations, capitalization and management with a view to optimizing Pathmark's potential in conjunction with Parent's other operations and maximizing the synergies that are expected to result therefrom. Except as otherwise discussed in this Offer to Purchase, Parent has no present plans or proposals that would result in any extraordinary corporate transaction, such as a merger, reorganization, liquidation involving the Company or Pathmark or any of their respective subsidiaries, or sale or transfer of a material amount of assets of the Company or Pathmark or any of their respective subsidiaries or in any other material changes to the Company's or Pathmark's capitalization, dividend policy, corporate structure, business or composition of the Board of Directors, the board of directors of Pathmark or the management of Pathmark, except that Parent intends to review the composition of the boards of directors of each of the subsidiaries of SMG- II and cause the election to such boards of certain of its representatives. SMG-II Merger Agreement. The following is a summary of the material terms of the SMG-II Merger Agreement. The summary is qualified in its entirety by reference to the SMG-II Merger Agreement which is incorporated herein by reference and a copy of which has been filed with the Commission as an exhibit to the Schedule 14D-1. The SMG-II Merger Agreement may be inspected at, and copies may be obtained from, the same places and in the manner set forth in Section 7. The Offer. The SMG-II Merger Agreement provides that the Purchaser will commence the Offer and that the obligation of the Purchaser to consummate the Offer and to accept for payment and to pay for any Shares tendered pursuant to the Offer shall be subject to only those conditions set forth in Section 14-- "Conditions of the Offer". The Purchaser may not amend, change or waive any of the conditions described in Section 14--"Conditions of the Offer" without the prior written consent of SMG-II. In the SMG-II Merger Agreement, SMG-II consented to the Offer and represented that the Board of Directors has (i) determined by unanimous vote that each of the Offer and the Company Merger, upon the terms and conditions of the SMG-II Merger Agreement, is fair to, and in the best interests of, the holders of Shares, (ii) approved the Offer and the Company Merger in accordance with the provisions of the DGCL and (iii) recommended acceptance of the Offer. The SMG-II Merger. The SMG-II Merger Agreement provides that, subject to the terms and conditions thereof, and in accordance with the DGCL, the Purchaser shall be merged with and into SMG-II as soon as practicable following the satisfaction or waiver of the conditions set forth in the SMG-II Merger Agreement, which conditions are described below. Following the SMG-II Merger, the separate corporate existence of the Purchaser will cease and SMG-II will continue as the surviving corporation (the "Surviving SMG-II Corporation"). In the SMG-II Merger, on the date and at the time when the SMG-II Merger shall become effective (the "Effective Time") each outstanding share of Class A Common Stock, par value $0.01 per share (the "Class A Common Stock"), of SMG-II, each issued and outstanding share of Class B Common Stock, par value $0.01 per share (the "Class B Common Stock"), of SMG-II, each issued and outstanding share of Series A Cumulative Convertible Preferred Stock, par value $0.01 per share (the "Series A Preferred Stock"), of SMG-II, each issued and outstanding share of Series B Cumulative Convertible Preferred Stock, par value $0.01 per share (the "Series B Preferred Stock"), of SMG-II, and each issued and outstanding share of Series C Cumulative Convertible Preferred Stock, par value $0.01 per share (the "Series C Preferred Stock" and, together with the Class A Common Stock, the 24 Class B Common Stock, the Series A Preferred Stock and the Series B Preferred Stock, collectively, the "SMG-II Stock") (other than shares of SMG-II Stock held by any subsidiary of SMG-II or in the treasury of SMG-II, or by Parent, the Purchaser or any other subsidiary of Parent, which shares of SMG-II Stock will be cancelled, and other shares of SMG-II Stock, if any, held by stockholders who perfect their appraisal rights under the DGCL) will by virtue of the SMG-II Merger Agreement and without any action by the holder thereof, be converted into the right to receive, in the case of Class A Common Stock and Class B Common Stock, $5.315 in cash and in the case of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, $113.353 in cash (such amount, with respect to each such share of SMG-II Stock, the "Applicable Merger Consideration") payable to the holder thereof, without interest thereon. At the Effective Time, each share of common stock, par value $0.01 per share, of the Purchaser then issued and outstanding will, by virtue of the SMG-II Merger and without any action on the part of the holder thereof, be converted into one fully paid and non-assessable share of common stock of the Surviving SMG-II Corporation. If Parent so elects, the SMG-II Merger may alternatively be structured with Purchaser as the Surviving SMG-II Corporation or so that any direct or indirect subsidiary of Parent is merged with and into SMG-II or SMG-II is merged with and into any such other subsidiary (an "Alternative Structure"). In the event of such an election, the Parent, the Purchaser and SMG-II shall execute an appropriate amendment to the SMG-II Merger Agreement in order to reflect such election. If Parent elects to use an Alternative Structure, the inaccuracy of any representation or warranty of SMG-II which is premised on the assumption that Purchaser shall be merged with and into SMG-II and SMG-II shall be the Surviving SMG-II Corporation, which representation or warranty becomes inaccurate solely as a result of the use of such Alternative Structure, shall not be deemed to be a breach of such representation or warranty. The SMG-II Merger Agreement provides that the respective obligations of Parent and the Purchaser, on the one hand, and SMG-II, on the other hand, to effect the SMG-II Merger are subject to the satisfaction or waiver (subject to applicable law) at or prior to the closing of the transactions contemplated by the SMG-II Merger Agreement (the "SMG-II Merger Closing") of each of the following conditions: (i) the SMG-II Merger Agreement and the SMG-II Merger shall have been approved and adopted by holders of two-thirds of SMG-II Stock (voting as one class, with each share of SMG-II Stock having one (1) vote); (ii) any waiting period (and any extension thereof) under the Hart-Scott- Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder (the "HSR Act") applicable to the SMG-II Merger shall have expired or been terminated; (iii) no preliminary or permanent injunction or other order shall have been issued by any court or by any governmental or regulatory agency, body or authority which prohibits, restrains, enjoins or restricts the consummation of the SMG-II Merger or the Offer and which is in effect at the SMG-II Merger Closing; provided, however, that, in the case of a decree, injunction or other order, each of the parties shall have used all reasonable efforts to prevent the entry of any such injunction or other order and to appeal as promptly as possible any decree, injunction or other order that may be entered; and (iv) no statute, rule, regulation, executive order, decree or order of any kind shall have been enacted, entered, promulgated or enforced by any court or governmental authority which prohibits, restrains, enjoins or restricts the consummation of the Offer or the SMG-II Merger or has the effect of making the SMG-II Merger or the Offer illegal. The obligations of the Parent and the Purchaser to effect the SMG-II Merger are further subject to the satisfaction or waiver (subject to applicable law) at or prior to the SMG-II Merger Closing of the following additional conditions: (i) each representation or warranty of SMG-II contained in the SMG-II Merger Agreement that is subject to, or qualified by, "material adverse effect", "material adverse change" or other materiality qualification shall be true and correct, in each case as if such representation or warranty was made at the SMG-II Merger Closing, and any representation or warranty that is not so qualified shall be true and correct in any respect which would otherwise have a material adverse effect on the business, properties, assets, liabilities, results of operations or condition (financial or otherwise) (a "Condition") of SMG-II and its subsidiaries taken as a whole, in each case 25 as if such representation or warranty was made at the SMG-II Merger Closing except as to any representation or warranty which speaks as of a specific date or for a specific period, which must be true and correct in the foregoing respects as of such specific date or period, and Parent shall have received a certificate signed by an executive officer of SMG-II, dated as of the date of the SMG-II Merger Closing (the "SMG-II Merger Closing Date"), to such effect; (ii) SMG-II shall have performed in all material respects all obligations and complied in all material respects with all agreements and covenants to be performed or complied with by it under the SMG-II Merger Agreement and, in the case only of failures to perform any such agreement or covenant of SMG-II, such failure to perform did not or would not have a material adverse effect on the Condition of SMG-II and its subsidiaries taken as a whole or materially adversely affect the ability of Parent or the Purchaser to consummate the transactions contemplated by the SMG-II Merger Agreement or have a material adverse effect on the value of SMG-II and its subsidiaries taken as a whole and Parent shall have received a certificate signed by an executive officer of SMG-II, dated the SMG-II Merger Closing Date, to such effect; (iii) the conditions of the Offer set forth in Section 14--"Conditions of the Offer" including, without limitation, the Minimum Condition shall have been fulfilled without any waiver thereof; (iv) holders of SMG-II Stock representing in the aggregate not more than 5% of the amount that would be payable by Parent or the Purchaser pursuant to the terms of the SMG-II Merger if there would be no dissenting holders of SMG-II Stock (the "SMG-II Dissenting Stockholders") shall (x) have perfected their appraisal rights under the DGCL or (y) be entitled after the SMG-II Merger Closing to so perfect their appraisal rights; (v) the Stockholders Agreement, dated as of February 4, 1991, by and among SMG-II and its stockholders (the "Shareholders Agreement") shall have been terminated; (vi) since the date of the SMG-II Merger Agreement, no event shall have occurred such that there would be a material adverse change in the Condition of SMG-II and its subsidiaries taken as a whole; and (vii) Parent shall have received an irrevocable letter from SMG-II, signed by an executive officer of SMG-II stating that all of the conditions to the obligations of SMG-II to effect the SMG-II Merger set forth in Article VII of the SMG-II Merger Agreement have been satisfied or waived. The obligations of SMG-II to effect the SMG-II Merger are further subject to the satisfaction at or prior to the SMG-II Merger Closing of the following additional conditions: (i) the representations and warranties of Parent and the Purchaser contained in the SMG-II Merger Agreement shall be true and correct in all material respects as if such representations and warranties were made at the SMG-II Merger Closing Date, and SMG-II shall have received a certificate signed by an executive officer of Parent, dated the SMG-II Merger Closing Date, to such effect; and (ii) each of Parent and the Purchaser shall have performed in all material respects all obligations and complied in all material respects with all agreements and covenants to be performed and complied with by it under the SMG-II Merger Agreement, and SMG-II shall have received a certificate signed by an executive officer of Parent, dated the SMG-II Merger Closing Date, to such effect. SMG-II's Board of Directors and Officers. The SMG-II Merger Agreement provides that at the Effective Time, the directors of the Purchaser immediately prior to the Effective Time shall be the directors of the Surviving SMG-II Corporation, each of such directors to hold office, subject to the applicable provisions of the Certificate of Incorporation and By-Laws of the Surviving SMG-II Corporation, until the next annual stockholders' meeting of the Surviving SMG-II Corporation and until their respective successors shall be duly elected or appointed and qualified. At the Effective Time, the officers of the Purchaser immediately prior to the Effective Time shall, subject to the applicable provisions of the Certificate of Incorporation and By-Laws of the Surviving SMG-II Corporation, be the officers of the Surviving SMG-II Corporation until their respective successors shall be duly elected or appointed and qualified. SMG-II Meeting. Pursuant to the SMG-II Merger Agreement, promptly after the execution of the SMG-II Merger Agreement, SMG-II, acting through the board of directors of SMG-II, shall, in accordance with applicable law, (i) call a special meeting of its stockholders (the "Special Meeting") for the purpose of voting upon the SMG-II Merger Agreement and the SMG-II Merger or (ii) use its 26 reasonable efforts to solicit in writing the consent to the SMG-II Merger Agreement and the SMG-II Merger from all holders of the SMG-II Stock. SMG-II has agreed that it shall include in its proxy solicitation or, as the case may be, consent solicitation the recommendation of the board of directors of SMG- II that stockholders of SMG-II approve and adopt the SMG-II Merger Agreement and approve the SMG-II Merger and take all other lawful action necessary and advisable to secure the vote or, as the case may be, consent of holders of 66 2/3% of SMG-II Stock (voting as one class, with each share having one vote) in favor of the SMG-II Merger and the SMG-II Merger Agreement. Interim Operations. The SMG-II Merger Agreement provides that, except as contemplated by the SMG-II Merger Agreement, during the period from the date of the SMG-II Merger Agreement until the Effective Time, each of SMG-II and its subsidiaries will conduct its operations according to its ordinary course of business, consistent with past practice, and will use best efforts to (i) preserve intact its business organization, (ii) maintain its material rights and franchises, (iii) keep available the services of its officers and employees, (iv) maintain satisfactory relationships with suppliers, distributors, customers and others having business relationships with them and (v) take measures to reduce to zero any excess loss account (as determined in accordance with Treasury Regulations 1.1502-14, 1.1502-19 and 1.1502-32) reflected on the books and records of SMG-II and its subsidiaries or as subsequently determined by SMG-II. Without limiting the generality of and in addition to the foregoing, and except as otherwise contemplated by the SMG-II Merger Agreement, prior to the time specified in the preceding sentence, SMG- II shall not, and it shall cause each of its subsidiaries not to, without the prior written consent of Parent: (a) amend its certificate of incorporation or by-laws or other organizational documents in any way; (b) authorize for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise) any stock of any class or any other securities other than shares of Class A Common Stock issuable pursuant to the terms of existing management options; (c) split, combine or reclassify any shares of its capital stock, declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock or redeem or otherwise acquire any of its securities; (d) (A) pledge or otherwise encumber shares of its capital stock; (B) except in the ordinary course of business consistent with past practices: (1) incur, assume or prepay any obligations with respect to any long-term debt, letters of credit or short-term debt, other than indebtedness (x) incurred, assumed or prepaid under Pathmark's working capital facility, (y) that is mandatorily prepayable in accordance with its terms and (z) that is intercompany indebtedness by and among SMG-II and its subsidiaries (other than the Company or Pathmark Risk Management Corporation) ("PRMC"); (2) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for any material obligations of any Person except wholly-owned subsidiaries; or (3) make any material loans, advances or capital contributions to, or investments in, any other Person; or (C) mortgage or pledge any of its assets or create or permit to exist any material lien thereupon that secures indebtedness for borrowed money; (e) except as required by law or existing written agreements, enter into, adopt or materially amend any bonus, profit sharing, compensation, severance, termination, stock option, stock appreciation right, restricted stock, performance unit, pension, retirement, deferred compensation, employment, severance or other employee benefit agreements, trusts, plans, funds or other arrangements of or for the benefit or welfare of any employee of SMG-II and its subsidiaries, or (except for normal increases in the ordinary course of business that are consistent with past practices) increase in any manner the compensation or fringe benefits of any such employee or pay any benefit not required by any existing plan and arrangement (including, without limitation, the granting of stock options, stock appreciation rights, shares of restricted stock or performance units) or enter into any contract, agreement, commitment or arrangement to do any of the foregoing; (f) transfer, sell, lease, license or dispose of any lines of business, subsidiaries, divisions, operating units or facilities outside the ordinary course of business or enter into any material commitment or transaction outside the ordinary course of business other than any such transactions between or among SMG-II and its subsidiaries (other than the Company or PRMC); (g) other than any such transactions between or among any of SMG-II and its 27 subsidiaries (other than the Company or, except with respect to any transaction intended to reduce to zero any excess loss account, PRMC), acquire or agree to acquire, by merging or consolidating with, by purchasing an equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets of any other person (other than the purchase of assets in the ordinary course of business and consistent with past practice), in each case where such action would be material to the Condition of SMG-II and its subsidiaries taken as a whole; (h) except as may be required by law or existing written contractual or collective bargaining agreements or in connection with the termination of any employee, take any action to terminate or materially amend in a manner adverse to SMG-II or any of its subsidiaries, any of its pension plans or retiree medical plans with respect to or for the benefit of any employee of SMG-II or its subsidiaries; (i) materially modify, amend or terminate any significant contract to which it is a party or waive any of its material rights or claims except in the ordinary course of business consistent with past practice; (j) effect any material change in any of its methods of accounting, except as may be required by law or generally accepted accounting principles; (k) (A) take any action, engage in any transaction or enter into any agreement which would cause any of the representations or warranties set forth in Article III of the SMG-II Merger Agreement that are subject to, or qualified by, a "material adverse effect", "material adverse change" or other materiality qualification to be untrue as of the Effective Time, or any such representations and warranties that are not so qualified to be untrue in any respect which would have a material adverse effect on the Condition of SMG-II and its subsidiaries taken as a whole or (B) purchase or acquire, or offer to purchase or acquire, any shares of capital stock of SMG-II; (l) take any action, including, without limitation, the adoption of any stockholder rights plan or amendments to the Certificate of Incorporation of SMG-II, which would, directly or indirectly, restrict or impair the ability of Parent to vote, or otherwise to exercise the rights and receive the benefits of a stockholder with respect to, securities of SMG-II that may be acquired or controlled by Parent or the Purchaser or permit any stockholder to acquire securities of SMG-II on a basis not available to Parent in the event that Parent were to acquire securities of SMG-II; and (m) enter into a legally binding commitment with respect to, or any agreement to take, any of the foregoing actions. Notwithstanding anything else provided in the foregoing paragraph to the contrary, the following are permitted under the SMG-II Merger Agreement: (1) the acquisition of direct or indirect interests in real property intended for the operation of stores of Pathmark or any of its subsidiaries (other than PRMC), the improvement of real property, the remodeling of stores of Pathmark or any of its subsidiaries (other than PRMC) and the obtaining of financing therefor in the ordinary course of business consistent with past practice, (2) the negotiation and entering into by Pathmark or any of its subsidiaries (other than PRMC) of amendments to existing leases for real property in the ordinary course of business, (3) the negotiation in good faith and entering into new collective bargaining agreements by Pathmark that replace agreements that have expired or will expire pursuant to their terms within 90 days from the date of the commencement of negotiations, (4) the marketing and sale of certain real estate not used in the supermarket business by Pathmark or any of its subsidiaries (other than PRMC), provided that no such sale (other than a sale pursuant to a binding agreement to which SMG-II was a party on March 9, 1999) shall be agreed to without the prior adequate consultation with Parent, (5) entering into amendments to the Credit Agreement among Pathmark, various banks, and The Chase Manhattan Bank, as Agent, dated as of June 30, 1997, as amended and restated (the "Pathmark Credit Agreement"), to modify covenants as required (other than modifications, except for a possible increase in the interest rate, which will make any one or more covenants more restrictive) and (6) entering into an agreement implementing the amendments to the First Amended and Restated Supply Agreement dated January 29, 1998, by and between Pathmark and C&S Wholesale Grocers, Inc. (the "Supply Agreement") agreed to in a memorandum of understanding effective December 27, 1998 by and between Pathmark and C&S Wholesale Grocers, Inc. No Solicitation. The SMG-II Merger Agreement provides that SMG-II shall not, and SMG-II shall cause each of its subsidiaries not to, directly or indirectly, take (or authorize or permit their respective 28 officers, directors, employees, representatives, consultants, investment bankers, attorneys, accountants or other agents or affiliates, to so take) any action to (i) solicit, initiate or encourage the submission of any Acquisition Proposal (as defined below), (ii) enter into an agreement of merger or other business combination or an agreement for the sale or other disposition by SMG- II or any of its subsidiaries of a material amount of assets or a sale of shares of capital stock whether by merger or other business combination or tender or exchange offer or (iii) participate in any way in discussions or negotiations with, or, furnish any information to, any Person (other than Parent or the Purchaser) 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. For purposes of the SMG-II Merger Agreement, "Acquisition Proposal" means any proposed merger or other business combination, sale or other disposition of any material amount of assets, sale of shares of capital stock, tender offer or exchange offer or similar transactions involving SMG-II or any of its subsidiaries. The SMG-II Merger Agreement provides that the board of directors of SMG-II shall not take any action to withdraw or modify in a manner adverse to Parent or the Purchaser, or take a position inconsistent with, its approvals or recommendation of the SMG-II Merger or the SMG-II Merger Agreement or to recommend another Acquisition Proposal and shall not resolve to do any of the foregoing. In addition to the obligations of SMG-II set forth previously in this paragraph, SMG-II has agreed that it will, and will cause each of its subsidiaries to, promptly advise Parent of any request for information or of any Acquisition Proposal, or any proposal with respect to any Acquisition Proposal, the material terms and conditions of such Acquisition Proposal, and the identity of the person making any such Acquisition Proposal or inquiry. Immediately following the execution of the SMG-II Merger Agreement, SMG-II shall, and shall cause each of its subsidiaries and each of their respective officers, directors, employees, representatives, consultants, investment bankers, attorneys, accountants or other agents or affiliates to, cease any existing discussions or negotiations with any parties previously conducted with respect to any Acquisition Proposal and request each person which has previously executed a confidentiality agreement in connection with its consideration of acquiring SMG-II or any of its subsidiaries or any portion thereof to return all confidential information heretofore furnished to such person by or on behalf of SMG-II or any of its subsidiaries. Directors' and Officers' Insurance and Indemnification. Parent has agreed in the SMG-II Merger Agreement that the certificate of incorporation and the by- laws of the Surviving SMG-II Corporation shall contain the provisions with respect to indemnification and exculpation from liability set forth in SMG- II's Certificate of Incorporation and By-Laws on March 9, 1999, which provisions shall not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would adversely affect the rights of individuals, who, on or prior to the Effective Time, were directors, officers, employees or agents of SMG-II unless such modification is required by law. Parent also has agreed that all rights of indemnification now existing in favor of any director, officer, employee, or agent of the subsidiaries of SMG-II as provided in their respective charters or by-laws on date of the SMG-II Merger Agreement shall survive the SMG-II Merger and shall continue in full force and effect for a period of six years from the Effective Date. In addition, pursuant to the SMG-II Merger Agreement, the Surviving SMG- II Corporation shall for the six year period commencing on the Effective Time either (a) maintain in effect SMG-II's current directors' and officers' liability insurance covering those persons who are currently covered on the date of the SMG-II Merger Agreement by SMG-II's directors' and officers' liability insurance policy (the "SMG-II Indemnified Parties"); provided, however, that in no event shall Parent be required to expend in any one year an amount in excess of 150% of the annual premiums currently paid by SMG-II for such insurance; provided, further, that if the annual premiums of such insurance coverage exceed such amount, the Surviving SMG-II Corporation shall be obligated to obtain a policy with the greatest coverage available for a cost not exceeding such amount; and provided, further, that the Surviving SMG- II Corporation may substitute for such SMG-II's policies, policies with at least the same coverage containing terms and conditions which are no less advantageous and provided that said substitution does not result in any gaps or lapses in coverage with respect to matters occurring prior to the Effective Time or (b) cause Parent's directors' and 29 officers' liability insurance then in effect to cover those persons who are covered on the date of the SMG-II Merger Agreement by SMG-II's directors' and officers' liability insurance policy with respect to those matters covered by SMG-II's directors' and officers' liability policy. Parent has agreed to indemnify, and to cause the Surviving SMG-II Corporation to indemnify, all SMG-II Indemnified Parties to the fullest extent permitted by applicable law with respect to all acts and omissions arising out of such individuals' services as officers, directors, employees or agents of SMG-II or any of its subsidiaries or as trustees or fiduciaries of any plan for the benefit of employees of SMG-II or any of its subsidiaries, occurring prior to the Effective Time including, without limitation, the transactions contemplated by the SMG-II Merger Agreement. Compensation and Benefits. During the period commencing at the Effective Time and ending on the first anniversary thereof, Parent shall cause the current and former employees of Pathmark and its subsidiaries who are, on the SMG-II Merger Closing Date, entitled to receive compensation or any benefits from Pathmark or any of its subsidiaries to be provided with compensation and employee benefit plans (other than stock option or other plans involving the potential issuance of securities of SMG-II, Parent, or any of their respective subsidiaries and incentive compensation or similar programs) which in the aggregate are not materially less favorable than those currently provided to such employees by Pathmark and its subsidiaries, to the extent permitted under laws and regulations in force from time to time, provided, that employees covered by collective bargaining agreements need not be provided such benefits, and provided, further, that Parent reserves the right to review all employee benefits after the Effective Time and to make such changes as it deems appropriate. Options. Pursuant to the SMG-II Merger Agreement, prior to the Effective Time, the board of directors of SMG-II (or, if appropriate, any committee thereof) shall take all actions and shall obtain all necessary consents and releases from all of the holders of all the outstanding stock options and other rights to purchase SMG-II Stock (the "Management Options") heretofore granted under any stock option plan of SMG-II or otherwise (collectively, the "Stock Plans") to (i) provide for the cancellation, effective as of the Effective Time of all Management Options, (ii) terminate, as of the Effective Time, the Stock Plans and any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of SMG-II or its subsidiaries (collectively with the Stock Plans, the "Stock Incentive Plans") with respect to any interest in the capital stock of SMG-II or any of its subsidiaries and (iii) amend, as of the SMG-II Merger Closing Date, the provisions of any other employee benefit plan providing for the issuance, transfer or grant of any capital stock of SMG-II or any of its subsidiaries to provide no continuing rights to acquire, hold, transfer or grant any capital stock of SMG-II or any of its subsidiaries or any interest in the capital stock of SMG-II or any of its subsidiaries. Incident to the foregoing, any of the then outstanding stock appreciation rights or limited stock appreciation rights shall be canceled immediately prior to the Effective Time without any payment therefor. Agreement to Use Best Efforts. Pursuant to the SMG-II Merger Agreement and subject to the terms and conditions thereof, each of SMG-II, Parent, and the Purchaser shall, and SMG-II shall cause each of its subsidiaries to, cooperate and use their respective best efforts to take, or cause to be taken, all appropriate action, and to make, or cause to be made, all filings necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by the SMG-II Merger Agreement, including, without limitation, their respective best efforts to obtain, prior to the SMG-II Merger Closing Date, all licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts with SMG-II and its subsidiaries as are necessary for consummation of the transactions contemplated by the SMG-II Merger Agreement and to fulfill the conditions to the SMG-II Merger; provided, however, that no loan agreement or contract for borrowed money shall be repaid except as currently required by its 30 terms, in whole or in part, and no material contract shall be amended to increase the amount payable thereunder or otherwise to be materially more burdensome to SMG-II or any of its subsidiaries in order to obtain any such consent, approval or authorization without first obtaining the written approval of Parent. In addition, the SMG-II Merger Agreement provides that Parent, the Purchaser and SMG-II will (i) take promptly all actions necessary to make the filings required of Parent, the Purchaser or any of their affiliates under applicable antitrust laws, (ii) comply at the earliest practicable date with any request for additional information or documentary material received by Parent, SMG-II or any of their affiliates from the Federal Trade Commission (the "FTC") or the Antitrust Division of the Department of Justice pursuant to the HSR Act and (iii) cooperate in connection with any filing under applicable Antitrust Laws and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by the SMG-II Merger Agreement commenced by any of the FTC, the Antitrust Division of the Department of Justice or state attorneys general. Parent, the Purchaser and SMG-II shall in addition, each use all best efforts to resolve such objections, if any, as may be asserted with respect to the SMG-II Merger, the Stockholders Agreement or any other transactions contemplated by the SMG-II Merger Agreement under any Antitrust Law. Representations and Warranties. In the SMG-II Merger Agreement, SMG-II has made customary representations and warranties to Parent and the Purchaser with respect to, among other things, its organization, corporate authority, capitalization, financial statements, public filings, conduct of business, compliance with laws, consent and approvals, employee benefit plan triggering events, brokers' or finders' fees, state takeover statutes, vote required, undisclosed liabilities and the absence of any material adverse changes in SMG-II since January 31, 1998. Termination. The SMG-II Merger Agreement may be terminated at any time prior to the SMG-II Merger Closing, whether before or after approval of the SMG-II Merger by the stockholders of SMG-II: (a) subject to the provisions of the SMG-II Merger Agreement, by mutual consent of SMG-II, on the one hand, and of Parent, on the other hand; (b) by either Parent, on the one hand, or SMG-II, on the other hand, if any governmental or regulatory agency shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the SMG-II Merger and such order, decree or ruling or other action shall have become final and nonappealable; provided, however, that in the event the SMG-II Merger Agreement is terminated because of such an order, decree, ruling or other action with respect to the Offer, SMG-II and Parent shall, and SMG-II and Parent shall cause the Purchaser and PTK to, effect the closing ("Alternative Stock Purchase Agreement Closing") of the transactions contemplated by the Alternative Stock Purchase Agreement, subject to the terms and conditions of and as defined in the Alternative Stock Purchase Agreement; (c) by either Parent, on the one hand, or SMG-II, on the other hand, if the SMG-II Merger Closing shall not have occurred by December 15, 1999, unless the SMG-II Merger Closing shall not have occurred because of a material breach of any representation, warranty, obligation, covenant, agreement or condition set forth in the SMG-II Merger Agreement on the part of the party seeking to terminate the SMG-II Merger Agreement; (d) by Parent, (A) if the Offer is terminated or expires in accordance with its terms without the Purchaser having purchased any Shares thereunder due to a failure of any of the conditions described in Section 14--"Conditions of the Offer" to be satisfied, (B) if a preliminary or permanent injunction or other order shall have been issued by any court or by any governmental or regulatory agency, body or authority which prohibits, restrains, enjoins or restricts the consummation of the Offer and which is in effect at the SMG-II Merger Closing, or (C) a statute, rule, regulation, executive order, decree or order of any kind shall have been enacted, entered, promulgated or enforced by any court or governmental authority which prohibits, restrains, enjoins or restricts the consummation of the Offer or has the effect of making the purchase of the Shares illegal and (e) by Parent, at any time within 30 days after delivery of the audited consolidated financial statements of each of SMG-II and of Pathmark for the fiscal year ended January 30, 1999, in the event that such 31 financial statements disclose (A) a consolidated shareholder's deficiency of (x) SMG-II greater than $1,453,000,000 or (y) Pathmark greater than $1,188,400,000, in each case as of the end of such fiscal year or (B) net losses of (x) SMG-II materially greater than $29,321,000 or (y) Pathmark materially greater than $28,420,000, in each case for the fiscal year then ended. The SMG-II Merger Agreement provides that, in the event of termination pursuant to the provisions described above by Parent or the Purchaser, on the one hand, or SMG-II, on the other hand, no party will incur any liability to any other party except for breach of the SMG-II Merger Agreement and the survival of certain obligations including, without limitation, in the event of termination pursuant to clause (d) in the previous paragraph, the obligation of SMG-II to cause PTK to sell to the Purchaser, and the obligation of Parent to cause the Purchaser to purchase, all of the shares of the capital stock of Pathmark, subject to the terms and conditions of the Alternative Stock Purchase Agreement. The Stockholders Agreement. The following is a summary of the material terms of the Stockholders Agreement. This summary is not a complete description of the terms and conditions thereof and is qualified in its entirety by reference to the full text thereof which is incorporated herein by reference and a copy of which has been filed with the Commission as an exhibit to the Schedule 14D- 1. The Stockholders Agreement may be inspected at, and copies may be obtained from, the same places and in the manner set forth in Section 7--"Certain Information Concerning the Company". Concurrently with the execution of the SMG-II Merger Agreement and as required by Parent and the Purchaser, Parent, the Purchaser and the SMG-II Stockholders entered into the Stockholders Agreement. The SMG-II Stockholders are listed on Exhibit I to the Stockholders Agreement. Stock Option. Each SMG-II Stockholder has granted to the Purchaser an irrevocable option (the "Stock Option") to purchase SMG-II Stock held by each such SMG-II Stockholder on the date of the Stockholders Agreement, together with any shares of SMG-II Stock acquired by such SMG-II Stockholder after such date (the "Option Shares") at a purchase price per share equal to the Applicable Merger Consideration until the earlier of the termination of the SMG-II Merger Agreement as discussed above under the caption "Termination" (unless such SMG-II Stockholder breaches any of its obligations under the Stockholders Agreement in any material respect or if the SMG-II Merger Agreement is terminated as the result of a material breach of any representation, covenant or condition of the SMG-II Merger Agreement by SMG- II) and (ii) the election by a SMG-II Stockholder at any time after February 15, 2000 to terminate the Stockholders Agreement (the "Stockholders Agreement Termination Date"). Until the date of the termination of the Stockholders Agreement, if the SMG-II Merger Agreement is terminated in accordance with its terms (other than as a result of a material breach of any representation, warranty, obligation, covenant, agreement or condition of the SMG-II Merger Agreement by Parent or the Purchaser), the Stock Option shall become exercisable, in whole but not in part, and remain exercisable until the date which is 60 days after the date of the termination of the SMG-II Merger Agreement, but shall not be exercisable in each case unless: (i) all waiting periods under the HSR Act required for the purchase of the Option Shares upon such exercise shall have expired or been waived, and (ii) there shall not be in effect any preliminary or final injunction or other order issued by any court or governmental, administrative or regulatory agency or authority prohibiting the exercise of the Stock Option pursuant to the Stockholders Agreement. If the Stockholders Agreement has not been terminated, in the event that the Stock Option is not exercisable because the circumstances described in clauses (i) or (ii) of the preceding sentence do not exist, then the Stock Option shall be exercisable for the 60 day period commencing on the date that the circumstances set forth in clauses (i) and (ii) do exist. Voting. Each SMG-II Stockholder has agreed that, during the period commencing on the date of the Stockholders Agreement and continuing until the first to occur of (i) the Effective Time, (ii) the last date the Stock Option is exercisable pursuant to the Stockholders Agreement and (iii) the 32 Stockholders Agreement Termination Date, at any meeting of the holders of any class or classes of SMG-II Stock, however called, or in connection with any written consent of the holders of any class or classes of SMG-II Stock, each such SMG-II Stockholder will vote (or cause to be voted) the Option Shares (i) in favor of the SMG-II Merger and the approval of the terms of the SMG-II Merger Agreement and each of the other transactions contemplated by the SMG-II Merger Agreement and the Stockholders Agreement and any actions required in furtherance thereof; (ii) against any action, agreement or transaction that would result in a breach in any respect of any covenant, representation or warranty or any other obligation or agreement of SMG-II under the SMG-II Merger Agreement or the Stockholders Agreement; and (iii) except as otherwise agreed to in writing in advance by Parent, against the following actions (other than the SMG-II Merger and the transactions contemplated by the SMG-II Merger Agreement): (A) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving SMG-II or any of its subsidiaries; (B) a sale, lease or transfer of a material amount of assets of SMG-II or any of its subsidiaries, or a reorganization, recapitalization, dissolution or liquidation of SMG-II or any of its subsidiaries; or (C) (1) any change in a majority of the persons who constitute the board of directors of SMG-II; (2) any change in the present capitalization of SMG-II or any amendment of SMG-II's Certificate of Incorporation or By-Laws; (3) any other material change in SMG-II's corporate structure or business; or (4) any other action involving SMG-II or its subsidiaries which is intended, or could reasonably be expected, to impede, interfere with, delay, postpone, or materially adversely affect the SMG-II Merger and the transactions contemplated by the Stockholders Agreement and the SMG-II Merger Agreement. The SMG-II Stockholders have further agreed not to enter into any agreement or understanding with any person or entity the effect of which would be to violate the provisions and agreements described above. Representations, Warranties, Covenants and Other Agreements. In the Stockholders Agreement, each SMG-II Stockholder has made certain representations and warranties, including, without limitation, with respect to (i) ownership of the Option Shares owned by such SMG-II Stockholder on the date of the Stockholders Agreement, (ii) the legal capacity, power and authority to enter into and perform its obligations under the Stockholders Agreement, (iii) the ability of the SMG-II Stockholder to enter into the Stockholders Agreement without violating other agreements to which it is a party, (iv) the absence of finder's fees other than as set forth in the SMG-II Merger Agreement and (v) the absence of liens and encumbrances on and in respect of the Option Shares. Each SMG-II Stockholder has also entered into certain covenants, including, without limitation, with respect to (i) restrictions on the transfer of the Option Shares and (ii) the waiver of its appraisal rights. Each SMG-II Stockholder has agreed that, until the last day the Stock Option is exercisable pursuant to the Stockholders Agreement, it will not, in its capacity as such, directly or indirectly initiate, solicit (including by way of furnishing information), encourage or respond to or take any other action knowingly to facilitate, any inquiries or the making of any proposal by any person or entity (other than Parent or any affiliate of Parent) with respect to SMG-II that constitutes or reasonably may be expected to lead to an Acquisition Proposal, or enter into or maintain or continue discussions or negotiate with any person or entity in furtherance of such inquiries or to obtain any Acquisition Proposal, or agree to or endorse any Acquisition Proposal, or authorize or permit any person or entity acting on behalf of the SMG-II Stockholder to do any of the foregoing. If a SMG-II Stockholder receives any inquiry or proposal regarding any Acquisition Proposal, such SMG-II Stockholder shall promptly inform Parent of that inquiry or proposal and the details thereof. Termination. The Stockholders Agreement shall terminate and no party shall have any rights or obligations thereunder, upon the earlier of (1) termination of the SMG-II Merger Agreement pursuant to the termination provisions thereof (except that if any SMG-II Stockholder breaches any of its obligations under the Stockholders Agreement in any material respect or if the SMG-II Merger Agreement is terminated as the result of a material breach of any representation, warranty, obligation, covenant, agreement or condition of the SMG-II Merger Agreement by SMG-II) and (2) the election by any SMG-II Stockholder at any time after February 15, 2000 to terminate the Stockholders Agreement. 33 Company Merger Agreement. The following is a summary of the material terms of the Company Merger Agreement. The summary is qualified in its entirety by reference to the form of Company Merger Agreement which is an exhibit to the SMG-II Merger Agreement which is incorporated herein by reference and a copy of which has been filed with the Commission as an exhibit to the Schedule 14D- 1. The form of Company Merger Agreement may be inspected at, and copies may be obtained from, the same places and in the manner set forth in Section 7-- "Certain Information Concerning the Company". The SMG-II Merger Agreement provides that if not all of the Shares are acquired by the Purchaser pursuant to the terms of the Offer, Parent shall promptly after consummation of the SMG-II Merger cause the Company Merger to occur pursuant to the Company Merger Agreement. The Company Merger. The Company Merger Agreement will provide that, subject to the terms and conditions thereof, and in accordance with the DGCL, the Company shall be merged with and into SMG-II. Following the Company Merger, the separate corporate existence of the Company will cease and SMG-II will continue as the surviving corporation (the "Company Merger Surviving Corporation"). In the Company Merger, (i) each issued and outstanding share of Class A Common Stock and Class B Common Stock will be cancelled without payment to the holders thereof and (ii) each issued and outstanding Share (other than Shares held by any subsidiary of the Surviving SMG-II Corporation or in the treasury of the Surviving SMG-II Corporation, or by Parent, the Purchaser or any other subsidiary of Parent, which Shares will be cancelled, and other Shares, if any, held by stockholders who perfect their appraisal rights under the DGCL) will by virtue of the Company Merger and without any action by the holder thereof, be converted into the right to receive $38.25 in cash (the "Company Merger Consideration"), payable to the holder thereof, without interest thereon. At the Company Merger Effective Time (as hereinafter defined), each share of common stock, par value $.01 per share, of SMG-II then issued and outstanding will, by virtue of the Company Merger and without any action on the part of the holder thereof, be converted into one fully paid and non-assessable share of common stock, par value $0.01 per Share, of the Company Merger Surviving Corporation. The Company Merger Surviving Corporations' Board of Directors and Officers. The Company Merger Agreement provides that, at the effective time of the Company Merger (the "Company Merger Effective Time"), the directors of SMG-II immediately prior to the Company Merger Effective Time shall be the directors of the Company Merger Surviving Corporation, each of such directors shall hold office, subject to the applicable provisions of the Certificate of Incorporation and By-Laws of the Company Merger Surviving Corporation until the next annual shareholders' meeting of the Company Merger Surviving Corporation and until their respective successors shall be duly elected or appointed and qualified. At the Company Merger Effective Time, the officers of SMG-II immediately prior to the Company Merger Effective Time shall, subject to the applicable provisions of the Certificate of Incorporation and By-Laws of the Company Merger Surviving Corporation, be the officers of the Company Merger Surviving Corporation until their respective successors shall be duly elected or appointed and qualified. Amendment of the Company Merger Agreement. The Company Merger Agreement may be amended in writing by SMG-II and the Company, except that (i) no amendment may be made which decreases the Company Merger Consideration or adversely affects the rights of holders of Preferred Stock who comply with all of the provisions of the DGCL covering the rights of holders of Preferred Stock to dissent from the Company Merger and require appraisal of their Shares, without the approval of such stockholders and (ii) after any such stockholder approval, no amendment may be made which by law requires further approval by such stockholders without such further approval. 34 The Alternative Stock Purchase Agreement. Simultaneously with the execution of the SMG-II Merger Agreement, Parent, Purchaser, SMG-II and PTK executed the Alternative Stock Purchase Agreement. In the event that all of the conditions to the consummation of the SMG-II Merger (other than the Minimum Condition and certain related conditions) have been satisfied or waived, but the Minimum Condition or certain related conditions have not been satisfied or waived, SMG-II is obligated, pursuant to the terms and conditions of the Alternative Stock Purchase Agreement, to cause PTK to sell the Pathmark Stock to the Purchaser for a purchase price, payable in cash, equal to $242,800,000. The following is a summary of the material terms of the Alternative Stock Purchase Agreement. This summary is not a complete description of the terms and conditions thereof and is qualified in its entirety by reference to the full text thereof which is incorporated herein by reference and a copy of which has been filed with the Commission as an exhibit to the Schedule 14D-1. The Alternative Stock Purchase Agreement may be inspected at, and copies may be obtained from, the same places and in the manner set forth in Section 7-- "Certain Information Concerning the Company". Purchase of the Pathmark Stock. Pursuant to the Alternative Stock Purchase Agreement, PTK shall, and SMG-II shall cause PTK to, sell, assign, transfer and deliver to Purchaser (the "Alternative Stock Purchase") at the Alternative Stock Purchase Closing (with the date on which the Alternative Stock Purchase Closing takes place being referred to as the "Alternative Stock Purchase Closing Date"), and the Purchaser shall purchase from PTK, the Pathmark Stock for an aggregate amount of $242,800,000 (such amount, the "Pathmark Purchase Price"). The Alternative Stock Purchase Closing shall occur as soon as practicable after the later of (i) the satisfaction or waiver of the conditions set forth in the Alternative Stock Purchase Agreement (which conditions are described below) and (ii) the date of termination of the SMG-II Merger Agreement by Parent as a result of (x) the Offer having been terminated or expired in accordance with its terms without the Purchaser having purchased any Shares thereunder due to a failure of any of the conditions described in Section 14--"Conditions of the Offer" to be satisfied, (y) the issuance of a preliminary or permanent injunction or other order by any court or by any governmental or regulatory agency, body or authority which prohibits, restrains, enjoins or restricts the consummation of the Offer and which is in effect at the SMG-II Merger Closing, or (z) a statute, rule, regulation, executive order, decree or order of any kind having been enacted, entered, promulgated or enforced by any court or governmental authority which prohibits, restrains, enjoins or restricts the consummation of the Offer or has the effect of making the purchase of the Shares illegal. The Alternative Stock Purchase Agreement provides that the respective obligations of the Purchaser, on the one hand, and SMG-II and PTK (the "Sellers") on the other hand, to effect the Alternative Stock Purchase are subject to the satisfaction or waiver (subject to applicable law) at or prior to the Alternative Stock Purchase Closing of each of the following conditions: (i) any waiting period (and any extension thereof) under the HSR Act applicable to the Alternative Stock Purchase shall have expired or been terminated; (ii) no preliminary or permanent injunction or other order shall have been issued by any court or by any governmental or regulatory agency, body or authority which prohibits, restrains, enjoins or restricts the consummation of the Alternative Stock Purchase and the transactions contemplated by the Alternative Stock Purchase Agreement and which is in effect at the Alternative Stock Purchase Closing; provided, however, that, in the case of a decree, injunction or other order, each of the parties shall have used all reasonable efforts to prevent the entry of any such injunction or other order and to appeal as promptly as possible any decree, injunction or other order that may be entered; and (iii) no statute, rule, regulation, executive order, decree or order of any kind shall have been enacted, entered, promulgated or enforced by any court or governmental authority which prohibits, restrains, enjoins or restricts the consummation of the Alternative Stock Purchase or has the effect of making the purchase of the Pathmark Stock illegal. The obligations of the Parent and Purchaser to effect the Alternative Stock Purchase are further subject to the satisfaction or waiver (subject to applicable law) at or prior to the Alternative Stock Purchase Closing of the following additional conditions: (i) each representation or warranty of each of the Sellers contained in the 35 Alternative Stock Purchase Agreement that is subject to, or qualified by, "material adverse effect", "material adverse change" or other materiality qualification shall be true and correct, in each case as if such representation or warranty was made at the Alternative Stock Purchase Closing, any representation or warranty that is not so qualified shall be true and correct in any respect which would otherwise have a material adverse effect on the Condition of Pathmark and its subsidiaries taken as a whole, in each case as if such representation or warranty was made at the Alternative Stock Purchase Closing except as to any representation or warranty which speaks as of a specific date or for a specific period, which must be true and correct in the foregoing respects as of such specific date or period, and Parent shall have received a certificate signed by an executive officer of Pathmark, dated the Alternative Stock Purchase Closing Date, to such effect; (ii) each of the Sellers shall have performed in all material respects all obligations and complied in all material respects with all agreements and covenants to be performed or complied with by it under the Alternative Stock Purchase Agreement and, in the case only of failures to perform any such agreement or covenant of Sellers, such failure to perform did not or would not have a material adverse effect on the Condition of Pathmark and its subsidiaries taken as a whole or materially adversely affect the ability of Parent or the Purchaser to consummate the transactions contemplated by the Alternative Stock Purchase Agreement or have a material adverse effect on the value of Pathmark and its subsidiaries taken as a whole and Parent shall have received a certificate signed by an executive officer of Pathmark, dated the Alternative Stock Purchase Closing Date to such effect; and (iii) since the date of the Alternative Stock Purchase Agreement, no event shall have occurred such that there would be a material adverse change in the Condition of Pathmark and its subsidiaries taken as a whole. The obligations of each Seller to effect the Alternative Stock Purchase are further subject to the satisfaction of the following additional conditions: (i) the representations and warranties of Parent and the Purchaser contained in the Alternative Stock Purchase Agreement shall be true and correct in all material respects as if such representations and warranties were made at the Alternative Stock Purchase Closing, and Pathmark shall have received a certificate signed by an executive officer of Parent, dated the Alternative Stock Purchase Closing Date, to such effect; and (ii) each of Parent and the Purchaser shall have performed in all material respects all obligations and complied in all material respects with all agreements and covenants to be performed and complied with by it under the Alternative Stock Purchase Agreement, and Pathmark shall have received a certificate signed by an executive officer of Parent, dated the Alternative Stock Purchase Closing Date, to such effect. Interim Operations. The Alternative Stock Purchase Agreement provides that, except as contemplated by the Alternative Stock Purchase Agreement, during the period from the date of the Alternative Stock Purchase Agreement until the Alternative Stock Purchase Closing, the Sellers shall, and shall cause Pathmark and each of its subsidiaries to, conduct its operations in the ordinary course of business, consistent with past practice, will use its best efforts to (i) preserve intact its business organization, (ii) maintain its material rights and franchises, (iii) keep available the services of its officers and employees, (iv) maintain satisfactory relationships with, suppliers, distributors, customers and others having business relationships with them and (v) take measures to reduce to zero any excess loss account (as determined in accordance with Treasury Regulations 1.1502-14, 1.1502-19 and 1.1502-32) reflected on the books and records of Pathmark and its subsidiaries or as subsequently determined by Pathmark. Without limiting the generality of and in addition to the foregoing, and except as otherwise contemplated by the Alternative Stock Purchase Agreement, prior to the time specified in the preceding sentence, Sellers shall cause Pathmark and each of its subsidiaries not to, without the prior written consent of Parent: (a) amend its certificate of incorporation or by-laws or other organizational documents in any way; (b) authorize for issuance, issue, sell, deliver or agree to commit to issue, sell or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise) any stock of any class or any other securities; (c) split, combine or reclassify any shares of its capital stock, declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock or redeem or otherwise acquire any of its securities; (d) (A) pledge or otherwise encumber 36 shares of its capital stock; (B) except in the ordinary course of business consistent with past practices: (1) incur, assume or prepay any obligations with respect to any long-term debt, letters of credit or short-term debt, other than indebtedness (x) incurred, assumed or prepaid under the Working Capital Facility, (y) that is mandatorily prepayable in accordance with its terms and (z) that is intercompany indebtedness by and among Pathmark and any of its subsidiaries (other than PRMC); (2) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for any material obligations of any other person except any of its wholly-owned subsidiaries; or (3) make any material loans, advances or capital contributions to, or investments in, any other person; or (C) mortgage or pledge any of its assets or create or permit to exist any material lien thereupon that secures indebtedness for borrowed money; (e) except as required by law or existing written agreements, enter into, adopt or materially amend any bonus, profit sharing, compensation, severance, termination, stock option, stock appreciation right, restricted stock, performance unit, pension, retirement, deferred compensation, employment, severance or other employee benefit agreements, trusts, plans, funds or other arrangements of or for the benefit or welfare of any employee of Pathmark and its subsidiaries, or (except for normal increases in the ordinary course of business that are consistent with past practices) increase in any manner the compensation or fringe benefits of any such employee or pay any benefit not required by any existing plan and arrangement (including, without limitation, the granting of stock options, stock appreciation rights, shares of restricted stock or performance units) or enter into any contract, agreement, commitment or arrangement to do any of the foregoing; (f) transfer, sell, lease, license or dispose of any lines of business, subsidiaries, divisions, operating units or facilities outside the ordinary course of business or enter into any material commitment or transaction outside the ordinary course of business other than any such transactions between or among Pathmark and its subsidiaries (other than PRMC); (g) other than any such transactions between or among any of Pathmark and its subsidiaries (other than PRMC, except with respect to any transaction intended to reduce to zero any excess loss account), acquire or agree to acquire, by merging or consolidating with, by purchasing an equity interest or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or divisions thereof, or otherwise acquire or agree to acquire any other person (other than the purchase of assets in the ordinary course of business and consistent with past practice), in each case where such action would be material to the Condition of Pathmark and its subsidiaries taken as a whole; (h) except as may be required by law or existing written contractual or collective bargaining agreements or in connection with the termination of any employee, take any action to terminate or materially amend, in a manner adverse to Pathmark or any of its subsidiaries, any of its pension plans or retiree medical plans with respect to or for the benefit of any employee of Pathmark or any of its subsidiaries; (i) materially modify, amend or terminate any significant contract to which it is a party or waive any of its material rights or claims except in the ordinary course of business consistent with past practice; (j) effect any material change in any of its methods of accounting, except as may be required by law or generally accepted accounting principals; (k) (i) take any action, engage in any transaction or enter into any agreement which would cause any of the representations or warranties set forth in Article III of the Alternative Stock Purchase Agreement that are subject to, or qualified by, a "material adverse effect", "material adverse change" or other materiality qualification to be untrue as of the Alternative Stock Purchase Closing Date, or any such representations and warranties that are not so qualified to be untrue in any respect which would have a material adverse effect on the Condition of Pathmark and its subsidiaries taken as a whole or (ii) purchase or acquire, or offer to purchase or acquire, any shares of capital stock of Pathmark; (l) take any action, including, without limitation, the adoption of any shareholder rights plan or amendments to the Certificate of Incorporation of Pathmark, which would, directly or indirectly, restrict or impair the ability of Purchaser to vote, or otherwise to exercise the rights and receive the benefits of a shareholder with respect to, securities of Pathmark that may be acquired or controlled by the Purchaser or permit any shareholders to acquire securities of Pathmark on a basis not available to Purchaser in the event that Purchaser were to acquire securities of Pathmark; and (m) enter into a legally binding commitment with respect to, or any agreement to take, any of the foregoing actions. 37 Notwithstanding anything else provided in the foregoing paragraph to the contrary, the following are permitted under the Alternative Stock Purchase Agreement: (1) the acquisition of direct or indirect interests in real property intended for the operation of stores of Pathmark or any of its subsidiaries (other than PRMC), the improvement of real property, the remodeling of stores of Pathmark or any of its subsidiaries (other than PRMC) and the obtaining of financing therefor in the ordinary course of business consistent with past practice, (2) the negotiation and entering into by Pathmark or any of its subsidiaries (other than PRMC) of amendments to existing leases for real property in the ordinary course of business, (3) the negotiation in good faith and entering into new collective bargaining agreements by Pathmark that replace agreements that have expired or will expire pursuant to their terms within 90 days from the date of the commencement of negotiations, (4) the marketing and sale of certain real estate not used in the supermarket business by Pathmark or any of its subsidiaries (other than PRMC), provided that no such sale (other than a sale pursuant to a binding agreement to which Pathmark is a party on the date of the Alternative Stock Purchase Agreement) shall be agreed to without the prior adequate consultation with Parent, (5) entering into amendments to the Pathmark Credit Agreement to modify covenants as required (other than modifications, except for a possible increase in interest rate, which will make any one or more covenants more restrictive), (6) entering into an agreement implementing the amendments to the Supply Agreement agreed to in a memorandum of understanding dated December 27, 1998 by and between Pathmark and C&S Wholesale Grocers, Inc. and (7) Pathmark may distribute that certain indebtedness of PTK owed to Pathmark evidenced by a promissory note dated May 12, 1998 in the face amount of $53,202,328.52 as a dividend to PTK. No Solicitation. The Alternative Stock Purchase Agreement provides that Sellers shall not, and SMG-II shall cause Pathmark and each of its subsidiaries not to, directly or indirectly, take (or authorize or permit their respective officers, directors, employees, representatives, consultants, investment bankers, attorneys, accountants or other agents or affiliates, to so take) any action to (i) solicit, initiate or encourage the submission of any Acquisition Proposal, (ii) enter into an agreement of merger or other business combination or an agreement for the sale or other disposition by SMG- II or any of its subsidiaries of a material amount of assets or a sale of shares of capital stock whether by merger or other business combination or tender or exchange offer or (iii) participate in any way in discussions or negotiations with, or furnish any information to, any person (other than Parent or the Purchaser) 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. The Alternative Stock Purchase Agreement provides that the Board of Directors of each of the Sellers and Pathmark shall not take any action to withdraw or modify in a manner adverse to Parent or the Purchaser, or take a position inconsistent with, its approvals or recommendation of the Alternative Stock Purchase Agreement or to recommend another Acquisition Proposal and shall not resolve to do any of the foregoing. In addition to the obligations of Sellers set forth previously in this paragraph, Sellers have agreed that they will, and will cause Pathmark and each of its subsidiaries to, promptly advise Parent of any request for information or of any Acquisition Proposal, or any proposal with respect to any Acquisition Proposal, the material terms and conditions of such Acquisition Proposal, and the identity of the Person making any such Acquisition Proposal or inquiry. Immediately following the execution of the Alternative Stock Purchase Agreement, Sellers shall, and shall cause Pathmark and each of its subsidiaries and each of their respective officers, directors, employees, representatives, consultants, investment bankers, attorneys, accountants or other agents or affiliates to, cease any existing discussions or negotiations with any parties previously conducted with respect to any Acquisition Proposal and request each Person which has previously executed a confidentiality agreement in connection with its consideration of acquiring Pathmark or any of its subsidiaries or any portion thereof to return all confidential information furnished to such Person by or on behalf of Pathmark or any of its subsidiaries. Directors' and Officers' Insurance and Indemnification. Parent has agreed in the Alternative Stock Purchase Agreement that the Certificate of Incorporation and the By-Laws of Pathmark shall 38 contain the provisions with respect to indemnification and exculpation from liability set forth in Pathmark's Certificate of Incorporation and By-Laws on March 9, 1999, which provisions shall not be amended, repealed or otherwise modified for a period of six years from the Alternative Stock Purchase Closing Date in any manner that would adversely affect the rights of individuals, who, on or prior to the Alternative Stock Purchase Closing Date, were directors, officers, employees or agents of Pathmark, unless such modification is required by law. Parent also had agreed that all rights of indemnification now existing in favor of any director, officer, employee, or agent of the subsidiaries of Pathmark as provided in their respective charters or by-laws on the date of the Alternative Stock Purchase Agreement shall survive the Alternative Stock Purchase and shall continue in full force and effect for a period of six years from the Alternative Stock Purchase Closing Date. In addition, pursuant to the Alternative Stock Purchase Agreement, Pathmark shall for the six year period commencing on the Alternative Stock Purchase Closing Date either (a) maintain in effect Pathmark's current directors' and officers' liability insurance covering those persons who are currently covered on the date of the Alternative Stock Purchase Agreement by Pathmark's directors' and officers' liability insurance policy (the "Pathmark Indemnified Parties"); provided, however, that in no event shall Parent be required to expend in any one year an amount in excess of 150% of the annual premiums currently paid by Pathmark for such insurance which Pathmark has represented to be $323,000; provided, further, that if the annual premiums of such insurance coverage exceed such amount, Pathmark shall be obligated to obtain a policy with the greatest coverage available for a cost not exceeding such amount; and provided, further, that Pathmark may substitute for such policies, policies with at least the same coverage containing terms and conditions which are no less advantageous and provided that said substitution does not result in any gaps or lapses in coverage with respect to matters occurring prior to the Alternative Stock Purchase Closing Date or (b) cause Parent's directors' and officers' liability insurance then in effect to cover those persons who are covered on the date of the Alternative Stock Purchase Agreement by Pathmark's directors' and officers' liability insurance policy with respect to those matters covered by Pathmark's directors' and officers' liability policy. Parent has agreed to indemnify, and to cause Pathmark to indemnify, all Pathmark Indemnified Parties to the fullest extent permitted by applicable law with respect to all acts and omissions arising out of such individuals' services as officers, directors, employees or agents of Pathmark or any of its subsidiaries or as trustees or fiduciaries of any plan for the benefit of employees of Pathmark or any of its subsidiaries, occurring prior to the Alternative Stock Purchase Closing Date including, without limitation, the transactions contemplated by the Alternative Stock Purchase Agreement. Compensation and Benefits. During the period commencing at the Alternative Stock Purchase Closing Date and ending on the first anniversary thereof, Parent shall cause the current and former employees of Pathmark and its subsidiaries who are on the Alternative Stock Purchase Closing Date entitled to receive compensation or any benefits from Pathmark or any of its subsidiaries to be provided with compensation and employee benefit plans (other than stock option or other plans involving the potential issuance of securities of Pathmark, Parent, or any of their respective subsidiaries and incentive compensation or similar programs) which in the aggregate are not materially less favorable than those currently provided to such employees by Pathmark and its subsidiaries, to the extent permitted under laws and regulations in force from time to time, provided that employees covered by collective bargaining agreements need not be provided such benefits, and provided, further, that Parent reserves the right to review all employee benefits after the Alternative Stock Purchase Closing Date and to make such changes as it deems appropriate. Agreement to Use Best Efforts. Pursuant to the Alternative Stock Purchase Agreement and subject to the terms and conditions thereof, each of Sellers, Parent and the Purchaser shall, and the Sellers shall cause Pathmark and each of its subsidiaries to, cooperate and use their respective best efforts to take, or cause to be taken, all appropriate action, and to make, or cause to be made, all filings necessary, proper or advisable under applicable laws and regulations to consummate and make 39 effective the transactions contemplated by the Alternative Stock Purchase Agreement, including, without limitation, their respective best efforts to obtain, prior to the Alternative Stock Purchase Closing Date, all licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts with the Sellers and their respective subsidiaries as are necessary for consummation of the transactions contemplated by the Alternative Stock Purchase Agreement; provided, however, that no loan agreement or contract for borrowed money shall be repaid except as currently required by its terms, in whole or in part, and no material contract shall be amended to increase the amount payable thereunder or otherwise to be materially more burdensome to Pathmark or any of its subsidiaries in order to obtain any such consent, approval or authorization without first obtaining the written approval of Parent. In addition, the Alternative Stock Purchase Agreement provides that Parent, the Purchaser and Sellers will (i) take promptly all actions necessary to make the filings required of Parent, the Purchaser or any of their affiliates under the applicable antitrust laws, (ii) comply at the earliest practicable date with any request for additional information or documentary material received by Parent, Sellers or any of their affiliates from the FTC or the Antitrust Division of the Department of Justice pursuant to the HSR Act and (iii) cooperate in connection with any filing under applicable antitrust laws and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by the Alternative Stock Purchase Agreement commenced by any of the FTC, the Antitrust Division of the Department of Justice or state attorneys general. Parent, the Purchaser and Sellers shall in addition, each use all best efforts to resolve such objections, if any, as may be asserted with respect to any transaction contemplated by the Alternative Stock Purchase Agreement under any antitrust law. Certain Tax Matters. SMG-II shall have the obligation to prepare and timely file, or cause to be prepared and timely filed, all returns, statements, forms and reports for taxes ("Returns") that are required by law to be filed by, or with respect to, Pathmark or any of its subsidiaries with respect to any taxable year or period ending on or before and, with respect to any taxable year or period beginning before and ending after the Alternative Stock Purchase Closing Date, the portion of such taxable year or period ending on and including the Alternative Stock Purchase Closing Date ("Pre-Closing Period"); provided, however, with respect to Returns to be filed by SMG-II pursuant to this sentence for the Pre-Closing Period, (i) SMG-II shall provide Parent with draft federal, state, local and foreign income tax returns that include Pathmark or any of its subsidiaries at least thirty (30) days prior to the due date for filing such Returns, (ii) at least fifteen (15) days prior to the due date for the filing of such Returns, Parent shall notify SMG-II of the existence of any objection Parent may have to any items set forth on such draft Returns, and (iii) if, after consulting in good faith, SMG-II and Parent are unable to resolve such objection(s), such objection(s) shall be resolved by treating items on such Returns in a manner consistent with the past practices of Pathmark and its subsidiaries with respect to such items, if any, unless otherwise required by law (and if no past practice exists, the issue shall be resolved in favor of the party that would bear the relevant tax liability). At the request of SMG-II, Pathmark will prepare the Returns described in the preceding sentence (or any such Return specified), including any Returns required to be filed by SMG-II (or any of its subsidiaries) that includes Pathmark or any of its subsidiaries for the tax year of the SMG-II consolidated group that includes the Alternative Stock Purchase Closing Date, in a manner consistent with this paragraph. Parent and SMG-II agree to the extent permitted by applicable law to elect with the relevant taxing authority to treat for all purposes the Alternative Stock Purchase Closing Date as the last day of a taxable period of Pathmark and its subsidiaries. SMG-II and its subsidiaries other than Pathmark and its subsidiaries (the "SMG-II Group") shall be responsible and liable for the timely payment of any and all taxes imposed on or with respect to the properties, income and operations of the SMG-II Group including any gain to the SMG-II Group resulting from the sale of the Pathmark Stock. 40 Pathmark shall pay SMG-II the amount of any taxes allocated to Pathmark and its subsidiaries in connection with the filing of a Return pursuant to the second preceding paragraph (including taxes that may become payable as a result of an adjustment by any taxing authority in respect of a Pre-Closing Period) to the extent not already paid by Pathmark or any of its subsidiaries on or before the Alternative Stock Purchase Closing Date. To the extent reasonably practicable, at least ten (10) days prior to the due date for the filing of any such Return, SMG-II shall provide to Parent its calculation of the amount of such taxes allocable to Pathmark and its subsidiaries pursuant to this paragraph. No later than five (5) days prior to the due date for the filing of such Return, Parent shall notify SMG-II of any reasonable objections Parent may have to SMG-II's calculation of the amount of such taxes allocable to Pathmark and its subsidiaries pursuant to this paragraph, and, at such time, Pathmark and its subsidiaries shall pay to SMG-II the amount of taxes allocable to Pathmark and its subsidiaries pursuant to this paragraph as determined by SMG-II. Any objection Parent may have with respect to SMG-II's calculation of the amount of such taxes allocable to Pathmark and its subsidiaries pursuant to this paragraph shall not be a cause for any failure of Pathmark and its subsidiaries to make payments to Parent pursuant to this paragraph. Parent and SMG-II agree to consult and resolve in good faith any such objection, it being understood and agreed that in the absence of any such resolution, any and all objections shall be resolved by treating items, wherever possible, in a manner consistent with the past practices of Pathmark and its subsidiaries with respect to such items unless otherwise required by law. In the event Parent shall receive SMG-II's calculation of the amount of such taxes allocable to Pathmark and its subsidiaries pursuant to this paragraph and a draft of the relevant portions of such Return less than ten (10) days prior to the due date for filing such Return, Pathmark and its subsidiaries shall nevertheless endeavor in good faith to make payment to SMG- II by such due date. The SMG-II Group shall pay Pathmark the amount of any taxes that are refunded, or in respect of which the SMG-II Group obtains a credit usable by the SMG-II Group as an offset against taxes owed by the SMG-II Group, as the result of an adjustment by any taxing authority that are allocable to Pathmark or any of its subsidiaries (net of any taxes that are owed to any taxing authority as the result of an adjustment by such authority relating to a Pre- Closing Period that are allocable to Pathmark or any of its subsidiaries). Each party shall promptly notify the other in writing upon receipt by such party or any affiliate of such party of written notice of any inquiries, claims, assessments, audits or similar events with respect to taxes for which the other party may be liable (any such inquiry, claim, assessment, audit or similar event, a "Tax Matter"). Parent shall have the sole right to control any Tax Matter, initiate any claim for refund with respect to Pathmark or any of its subsidiaries, and contest, resolve and defend against any assessment for additional taxes, notice of tax deficiency or other adjustment of taxes of, or relating to, the income, assets or operations of Pathmark or any of its subsidiaries for all taxable periods to the extent that such Tax Matter or claim does not have an adverse impact on the SMG-II Group (or any of its members). SMG-II shall have the sole right to control any Tax Matter, initiate any claim for refund with respect to the SMG-II Group, and contest, resolve and defend against any assessment for additional taxes, notice of tax deficiency or other adjustment of taxes of, or relating to, the income, assets or operations of the SMG-II Group (or any of its members) for all taxable periods to the extent that such Tax Matter or claim does not have an adverse impact on Pathmark or any of its subsidiaries. Neither party shall file or cause to be filed any amended Return or claims for refund that would result in an increased tax liability of the other party without the prior written consent of such other party, which consent shall not be unreasonably withheld. The Alternative Stock Purchase Agreement also terminates and supersedes any and all of the tax sharing, allocation, indemnification or similar agreements, arrangements or undertakings in effect on 41 the Alternative Stock Purchase Closing Date as between the SMG-II Group or any predecessor or affiliate thereof, on the one hand, and Pathmark and any of its subsidiaries, on the other hand, for all taxes imposed by any government or taxing authority, regardless of the period in which such taxes are imposed. From and after the Alternative Stock Purchase Closing Date, SMG-II agrees, and agrees to cause each of its subsidiaries, to permit Parent or a representative of Parent to have reasonable access, during normal business hours, to the books and records of the SMG-II Group, to the extent that such books and records relate to a Pre-Closing Period, and to personnel, for the purpose of enabling Parent to (i) prepare the Returns specified in the first paragraph under the caption "Certain Tax Matters" and (ii) investigate or contest any Tax Matter which Parent has the authority to conduct under the third preceding paragraph. From and after the Alternative Stock Purchase Closing Date, Parent agrees, and agrees to cause Pathmark and each of its subsidiaries, to permit SMG-II to have reasonable access, during normal business hours, to the books and records of Pathmark and its subsidiaries, to the extent that such books and records relate to a Pre-Closing Period, and to personnel of Pathmark and its subsidiaries, for the purpose of enabling SMG-II to prepare the Returns specified above and to investigate or contest any Tax Matter which SMG-II has the authority to conduct as specified above. Representations and Warranties. In the Alternative Stock Purchase Agreement, Sellers have made customary representations and warranties to Parent and the Purchaser with respect to, among other things, Pathmark's organization, corporate authority, capitalization, financial statements, public filings, conduct of business, compliance with laws, consent and approvals, employee benefit plan triggering events, broker's or finder's fees, undisclosed liabilities and the absence of any material adverse changes in Pathmark since January 31, 1998. Termination. The Alternative Stock Purchase Agreement may be terminated at any time prior to the Alternative Stock Purchase Closing Date: (a) subject to the provisions of the Alternative Stock Purchase Agreement, by mutual consent of SMG-II, on the one hand, and of Parent, on the other hand; (b) by either Parent, on the one hand, or SMG-II, on the other hand, if any governmental or regulatory agency shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the Alternative Stock Purchase and such order, decree or ruling or other action shall have become final and nonappealable; (c) by either Parent, on the one hand, or Pathmark, on the other hand, if the Alternative Stock Purchase Closing shall not have occurred by December 15, 1999, unless the Alternative Stock Purchase Closing shall not have occurred because of a material breach of any representation, warranty, obligation, covenant, agreement or condition set forth in the Alternative Stock Purchase Agreement on the part of the party seeking to terminate the Alternative Stock Purchase Agreement and (d) by Parent, at any time within 30 days after delivery to it of the audited consolidated financial statements of each of SMG-II and of Pathmark for the fiscal year ended January 30, 1999, in the event that such financial statements disclose (i) a consolidated shareholder's deficiency of (x) SMG-II greater than $1,453,000,000 or (y) Pathmark greater than $1,188,400,000, in each case as of the end of such fiscal year or (ii) net losses of (x) SMG-II materially greater than $29,321,000 or (y) Pathmark materially greater than $28,420,000, in each case for the fiscal year then ended. The Alternative Stock Purchase Agreement further provides that it shall automatically be terminated and the transactions contemplated thereby shall be automatically abandoned at any time prior to the Alternative Stock Purchase Closing Date if all the conditions set forth in the SMG-II Merger Agreement have been satisfied prior to the SMG-II Merger Closing Date. The Alternative Stock Purchase Agreement provides that, in the event of termination pursuant to the provisions described above by Parent or the Purchaser, on the one hand, or SMG-II, on the other 42 hand, no party will incur any liability to any other party except for breach of the Alternative Stock Purchase Agreement. Confidentiality Agreement. The following is a summary of the Confidentiality Agreement dated as of December 30, 1998 between Parent and SMG-II (the "Confidentiality Agreement"). The summary is qualified in its entirety by reference to the Confidentiality Agreement, a copy of which has been filed with the Commission as an exhibit to the Schedule 14D-1. The Confidentiality Agreement can be inspected at, and copies may be obtained from, the same places and in the manner set forth in Section 7--"Certain Information Concerning the Company". Pursuant to the Confidentiality Agreement, Parent agreed, among other things, to keep confidential and not disclose or reveal any information about the business, financial condition, properties and operations of Pathmark (but excluding information which (i) is or will be in the public domain, (ii) was available to SMG-II on a nonconfidential basis prior to its disclosure by Pathmark, (iii) becomes available to SMG-II on a nonconfidential basis from a person other than Pathmark, which person is not otherwise bound by a confidentiality agreement with Pathmark or other obligation not to transmit such information and (iv) has been independently acquired (the "Proprietary Information")) to any person other than its Representatives (as hereinafter defined) who are actively and directly participating in Parent's evaluation of a proposed acquisition of SMG-II or any of its subsidiaries by Parent (the "Proposed Acquisition"), or who otherwise need to know the Proprietary Information for the purpose of evaluating the Proposed Acquisition. The Proprietary Information was provided to Parent in connection with the Proposed Acquisition and is not to be used by Parent for any purpose other than its evaluation of the Proposed Acquisition or the consummation of the Proposed Acquisition. In addition, Parent will not disclose to any person (other than its Representatives) any information about the Proposed Acquisition, or the terms or conditions, or any other facts relating thereto. Parent also agreed that, without SMG-II's prior written consent, it will not, for a period of nine months commencing on December 30, 1998, directly or indirectly solicit for employment or employ any person who is now employed by SMG-II or any of its subsidiaries and who is identified by Parent as a result of its evaluation in connection with the Proposed Acquisition. However, Parent is not prohibited from (i) employing any employee of SMG-II or its subsidiaries who contacts it on his or her own initiative and without any direct or indirect solicitation by Parent, and (ii) making generalized searches for employees by use of advertisements or regular executive searches in the media which are not targeted specifically at employees of SMG-II or its subsidiaries. As used in the Confidentiality Agreement, the term "person" is interpreted to include, without limitation, any corporation, company, partnership and individual. In addition, the term "Representative" means, as to any person, such person's affiliates and its and their directors, officers, employees, partners, members, agents, advisors (including, without limitation, financial advisors, lenders, underwriters, counsel and accountants), consultants and controlling persons. 12. Dividends and Distributions. As described above, the SMG-II Merger Agreement provides that prior to the consummation of the SMG-II Merger, SMG-II will cause the Company to not split, combine or reclassify any shares of its capital stock, declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock or redeem or otherwise acquire any of its securities. If, on or after March 9, 1999, the Company should (i) split, combine, reclassify, redeem or otherwise acquire any of its securities or (ii) authorize for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise) any stock of any class or any other Securities, then, subject to the provisions of Section 14-- "Conditions of the Offer", the Purchaser, in its sole discretion, may make such adjustments as it deems appropriate in the Offer Price and other 43 terms of the Offer, including, without limitation, the number or type of securities offered to be purchased. If, on or after March 9, 1999, the Company should declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock payable or distributable to stockholders of record on a date prior to the transfer of the Shares purchased pursuant to the Offer to Purchase on the Company's stock transfer records, then, subject to the provisions of Section 14--"Conditions of the Offer", (a) the Offer Price may, in the sole discretion of the Purchaser, be reduced by the amount of any such cash dividend or cash distribution and (b) the whole of any such noncash dividend, distribution or issuance to be received by the tendering stockholders will (i) be received and held by the tendering stockholders for the account of the Purchaser and will be required to be promptly remitted and transferred by each tendering stockholder to the Depositary for the account of the Purchaser, accompanied by appropriate documentation of transfer, or (ii) at the direction of the Purchaser, be exercised for the benefit of the Purchaser, in which case the proceeds of each exercise will promptly be remitted to the Purchaser. Pending such remittance and subject to applicable law, the Purchaser will be entitled to all rights and privileges as owner of any such noncash dividend, distribution, issuance or proceeds and may withhold the entire Offer Price or deduct from the Offer Price the amount or value thereof, as determined by the Purchaser in its sole discretion. Pursuant to the terms of the SMG-II Merger Agreement, the Company is prohibited from taking any of the actions described in the preceding paragraphs and nothing herein shall constitute a waiver by Parent or the Purchaser of any of its rights under the SMG-II Merger Agreement or a limitation of remedies available to Parent or the Purchaser for any breach of the SMG-II Merger Agreement, including termination thereof. 13. Effect of the Offer on the Market for the Shares; Exchange Act Registration. There currently exists a limited and sporadic public trading market for the Shares. The purchase of Shares pursuant to the Offer is expected to reduce the number of holders of Shares and the number of Shares. Consequently, depending upon the number of Shares purchased and the number of remaining holders of Shares, the purchase of Shares pursuant to the Offer may adversely affect the liquidity and market value of the remaining Shares held by the public. The Purchaser cannot predict whether the reduction in the number of Shares would have an adverse or beneficial effect on the market price for, or marketability of, the Shares or whether it would cause future market prices to be greater or less than the Offer Price. The Shares are not "margin securities," as such term is defined under the rules of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"). The Shares are currently registered under the Exchange Act. Such registration may be terminated upon application of the Company to the Commission if the Shares are not listed on a national securities exchange and there are fewer than 300 record holders of the Shares. The termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to holders of Shares and to the Commission and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable to the Shares. In addition, "affiliates" of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act of 1933. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be eligible for NASDAQ reporting. It is the present intention of the Purchaser to cause the Company to make an application for termination of registration of the Shares as soon as possible after successful completion of the Offer. 44 14. Conditions of the Offer. Notwithstanding any other provision of the Offer, the Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the Commission, including Rule 14e- 1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for any Shares tendered and may terminate or amend the Offer and may postpone the acceptance of, and payment for, Shares if (i) prior to the Expiration Date, the Minimum Condition has not been satisfied or (ii) at any time on or after March 9, 1999 and at or before the time of acceptance of Shares for payment or payment for any such Shares (whether or not any Shares have been accepted for payment or paid for pursuant to the Offer), any of the following shall occur: (a) (i) the Board of Directors of the Company or any committee thereof shall have withdrawn or modified in a manner adverse to Parent or the Purchaser the approval or recommendation of the Offer, or approved or recommended any takeover proposal with respect to the Company or any of its subsidiaries or for any acquisition of any capital stock of the Company or any of its subsidiaries (other than the Offer or the Company Merger), (ii) the Board of Directors of SMG-II or any committee thereof shall have withdrawn or modified in a manner adverse to Parent or the Purchaser the approval or recommendation of the SMG-II Merger or the SMG-II Merger Agreement, or approved or recommended any takeover proposal with respect to SMG-II or any of its subsidiaries or any acquisition of any capital stock of SMG-II or any of its subsidiaries (other than the SMG-II Merger), (iii) any person shall have entered into a definitive agreement or an agreement in principle with SMG-II, the Company or, as the case may be, any of their respective subsidiaries with respect to a tender offer or exchange offer for any capital stock of SMG-II, the Company or, as the case may be, any of their respective subsidiaries or a merger, consolidation or other business combination with or involving SMG-II, the Company or, as the case may be, any of their respective subsidiaries or (iv) the Board of Directors of SMG- II, the Company or, as the case may be, any of their respective subsidiaries or any committee of any of them shall have resolved to do any of the foregoing; or (b) Any representation or warranty of SMG-II set forth in the SMG-II Merger Agreement that is subject to, or qualified by, "material adverse effect", "material adverse change" or other materiality qualification shall not be true and correct, in each case as if such representation or warranty was made on the Expiration Date, and any representation or warranty that is not so qualified shall not be true and correct in any respect which would otherwise have a material adverse effect on the Condition of SMG-II and its subsidiaries taken as a whole, in each case as if such representation or warranty was made on the Expiration Date except as to any such representation or warranty which speaks as of a specific date or for a specific period, which must not be true and correct in the foregoing respects as of such specific date or period; or (c) SMG-II shall have failed to perform in any material respect any obligation or complied in any material respects with any agreement or covenant to be performed or complied with by it under the SMG-II Merger Agreement or, in the case only of failures to perform any agreement or covenant of SMG-II pursuant to Section 5.3 (other than clause (c) thereof) of the SMG-II Merger Agreement, such failure to perform did or would have a material adverse effect on the Condition of SMG-II and its subsidiaries taken as a whole or materially adversely effect the ability of Parent or the Purchaser to consummate the transactions contemplated by the SMG-II Merger Agreement or have a material adverse effect on the value of SMG-II and its subsidiaries taken as a whole; or (d) The SMG-II Merger Agreement and the SMG-II Merger shall not have been approved and adopted by holders of 66 2/3% of all of the issued and outstanding capital stock of SMG-II (voting as one class, with each share of stock having one (1) vote) in accordance with applicable law, the Certificate of Incorporation and By-Laws of SMG-II and the Stockholders' Agreement, dated February 4, 1991 (the "Shareholders Agreement") by and among SMG-II and its shareholders. 45 (e) Holders of shares of stock representing in the aggregate more than 5% of the amount that would be payable by Parent or the Purchaser pursuant to Section 2.5 of the SMG-II Merger Agreement if there would be no dissenting stockholders shall (i) have perfected their appraisal rights under Section 262 of the DGCL or (ii) be entitled after the Closing (as defined in the SMG-II Merger Agreement) to so perfect their appraisal rights; or (f) Any waiting period (and any extension thereof) under the HSR Act applicable to the SMG-II Merger shall not have expired or been terminated; or (g) A preliminary or permanent injunction or other order shall have been issued by any court or by any governmental or regulatory agency, body or authority which prohibits, restrains, enjoins or restricts the consummation of the SMG-II Merger or the Offer and is in effect at the Expiration Date; or (h) A statute, rule, regulation, executive order, decree or order of any kind shall have been enacted, entered, promulgated or enforced by any court or governmental authority which prohibits, restrains, enjoins or restricts the consummation of the SMG-II Merger or the Offer or has the effect of making the SMG-II Merger or the Offer illegal; or (i) The Shareholders Agreement shall not have been terminated; or (j) Since March 9, 1999, an event shall have occurred such that there would be a material adverse change in the Condition of SMG-II and its subsidiaries taken as a whole; or (k) Parent shall not have received an irrevocable letter from SMG-II, signed by an executive officer of SMG-II, stating that all of the conditions to the obligations of SMG-II to effect the SMG-II Merger set forth in Article VII of the SMG-II Merger Agreement have been satisfied or waived; or (l) the SMG-II Merger Agreement shall have been terminated in accordance with its terms; or (m) Any representation or warranty of Parent or the Purchaser contained in the SMG-II Merger Agreement shall not be true and correct in any material respect, in each case as if such representation or warranty was made on the Expiration Date; or (n) Parent or the Purchaser shall have failed to perform in any material respect any obligations or complied in any material respect with any agreement or covenant to be performed or complied with by it under the SMG- II Merger Agreement; which, in the reasonable judgment of the Purchaser, in any such case and regardless of the circumstances giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payment. The foregoing conditions (including those in the opening paragraph of this Section 14) are for the sole benefit of the Purchaser and may be asserted by the Purchaser, or may be waived by the Purchaser, in whole or in part, at any time and from time to time in its sole discretion. The failure by the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. Any determination by the Purchaser concerning the events described in this Section 14 will be final and binding upon all parties to the SMG-II Merger Agreement. 15. Certain Legal Matters; Regulatory Approvals. General. Except as otherwise disclosed herein, based on a review of publicly available information filed by the Company with the Commission, neither Parent nor the Purchaser is aware of (i) any license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by the acquisition of Shares by the Purchaser pursuant to the Offer or the Company Merger or (ii) any approval or other action by any 46 governmental, administrative or regulatory agency or authority, domestic or foreign, that would be required for the acquisition or ownership of Shares by the Purchaser as contemplated herein. Should any such approval or other action be required, the Purchaser currently contemplates that it would seek such approval or action. Many of the Company's stores sell alcoholic beverages and are subject to various state and local licensing requirements as a result. By virtue of these license and registration requirements, the Purchaser or the Company may be obligated to obtain certain governmental consents and approvals in order to comply with applicable law. The Purchaser believes that such approvals can be obtained in due course, and that the Company will continue to conduct its operations substantially in the same manner as before the transfer. The Purchaser's obligation under the Offer to accept for payment and pay for Shares is subject to certain conditions. See Section 14--"Conditions of the Offer". While the Purchaser does not currently intend to delay the acceptance for payment of Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or action, if needed, would be obtained or would be obtained without substantial conditions or that adverse consequences might not result to the business of the Company, Parent or the Purchaser or that certain parts of the businesses of the Company, Parent or the Purchaser might not have to be disposed of in the event that such approvals were not obtained or any other actions were not taken. State Takeover Laws. The Company is incorporated under the laws of the State of Delaware. In general, Section 203 of the DGCL prevents an "interested stockholder" (generally a person who owns or has the right to acquire 15% or more of a corporation's outstanding voting stock, or an affiliate or associate thereof) from engaging in a "business combination" (defined to include mergers and certain other transactions) with a Delaware corporation for a period of three years following the date such person became an interested stockholder unless, among other things, prior to the date the interested stockholder became an interested stockholder, the board of directors of the corporation approved either the business combination or the transaction in which the interested stockholder became an interested stockholder. SMG-II has represented to Parent and the Purchaser in the SMG-II Merger Agreement that the provisions of Section 203 of the DGCL are inapplicable to the Company. As a result, no action by the Board of Directors is required under such Section in respect of the Offer, the SMG-II Merger or the Company Merger. A number of other states have adopted laws and regulations applicable to attempts to acquire securities of corporations which are incorporated, or have substantial assets, stockholders, principal executive offices or principal places of business, or whose business operations otherwise have substantial economic effects, in such states. In Edgar v. MITE Corp., the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover Statute, which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However, in 1987 in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of Indiana may, as a matter of corporate law and, in particular, with respect to those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without the prior approval of the remaining stockholders. The state law before the Supreme Court was by its terms applicable only to corporations that had a substantial number of stockholders in the state and were incorporated there. The Company, directly or through subsidiaries, conducts business in a number of states throughout the United States, some of which have enacted takeover laws. Based on information supplied by the Company and SMG-II's representations in the SMG-II Merger Agreement, the Purchaser does not believe that any state takeover statutes apply to the Offer. Neither Parent nor the Purchaser has currently complied with any state takeover statute or regulation. The Purchaser reserves the right to challenge the applicability or validity of any state law purportedly applicable to the Offer or the Company Merger and nothing in this Offer to Purchase or any action taken in connection with the Offer or the Company Merger is intended as a waiver of such right. In the event it is asserted 47 that one or more state takeover laws is applicable to the Offer or the Company Merger, and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer or the Company Merger, the Purchaser might be required to file certain information with, or receive approvals from, the relevant state authorities. In addition, if enjoined, the Purchaser might be unable to accept for payment any Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer and the Company Merger. In such case, the Purchaser may not be obligated to accept for payment any Shares tendered. See Section 14--"Conditions of the Offer". Appraisal Rights. No appraisal rights are available to holders of Shares in connection with the Offer. However, if the Company Merger is consummated, a stockholder will have certain rights under Section 262 of the DGCL to dissent and demand appraisal of, and payment in cash for the fair value of, that stockholder's Shares. Those rights, if the statutory procedures are complied with, could lead to a judicial determination of the fair value (excluding any value arising from the Company Merger) required to be paid in cash to dissenting stockholders for their Shares. Any judicial determination of the fair value of Shares could be based upon considerations other than or in addition to the Offer Price and the market value of the Shares, including asset values and the investment value of the Shares. The value so determined could be more or less than the Offer Price. Failure to follow the steps required by Section 262 of the DGCL for perfecting appraisal rights may result in the loss of those rights. If a stockholder who demands appraisal under Section 262 of the DGCL fails to perfect, or effectively withdraws or loses, its right to appraisal, as provided in the DGCL, the Shares of that stockholder will be converted into the merger consideration in accordance with the Company Merger Agreement. A stockholder may withdraw his demand for appraisal by delivering to the Purchaser a written withdrawal of such demand for appraisal and acceptance of the Company Merger. The foregoing summary of the rights of objecting stockholders does not purport to be a complete statement of the procedures to be followed by stockholders desiring to exercise any available dissenters' rights. The preservation and exercise of dissenters' rights require strict adherence to the applicable provisions of the DGCL. In addition, several decisions by Delaware courts have held that, in certain instances, a controlling stockholder of a corporation involved in a merger with such controlling stockholder or its affiliates has a fiduciary duty to the other stockholders that requires the merger to be fair to such other stockholders. In determining whether a merger is fair to minority stockholders, the Delaware courts have considered, among other things, the type and amount of consideration to be received by the stockholders and whether there were fair dealings among the parties. Although the remedies of rescission or rescissory damages are possible in an action challenging a merger as a breach of fiduciary duty, decisions of the Delaware courts have indicated that in most cases the remedy available in a merger that is found not to be "fair" to minority stockholders is a damages remedy based on essentially the same principles as an appraisal. Going Private Transactions. Rule 13e-3 under the Exchange Act is applicable to certain "going-private" transactions. The Purchaser does not believe that Rule 13e-3 will be applicable to the Company Merger, unless, among other things, the Company Merger is completed more than one year after termination of the Offer. If applicable, Rule 13e-3 would require, among other things, that certain financial information regarding the Company and certain information regarding the fairness of the Company Merger and the consideration offered stockholders of the Company therein be filed with the Commission and disclosed to stockholders of the Company prior to consummation of the Company Merger. 48 Regulatory Approvals. Under the HSR Act, certain mergers and acquisitions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice (the "Antitrust Division") and the Federal Trade Commission (the "FTC") and certain waiting period requirements have been satisfied. The acquisition of Shares by the Purchaser pursuant to the Offer and the SMG-II Merger are subject to the HSR requirements. Under the provisions of the HSR Act applicable to the SMG-II Merger, the SMG-II Merger may not be consummated until the expiration of a 30-calendar day waiting period following the required filing of a Notification and Report Form under the HSR Act by Parent and SMG-II, which filings Parent and SMG-II expect to submit on or about March 22, 1999. Accordingly, the waiting period under the HSR Act would expire at 11:59 P.M., New York City time, on or about April 21, 1999, unless early termination of the waiting period is granted or Parent or SMG-II receives a request for additional information or documentary material prior thereto. If either the FTC or the Antitrust Division were to request additional information or documentary material prior to the expiration of the 30-day waiting period, the waiting period would be extended and would expire at 11:59 P.M., New York City time, on the twentieth calendar day after the date of substantial compliance by Parent with such request. Under the provisions of the HSR Act applicable to the purchase of Shares pursuant to the Offer, such purchase may not be made until the expiration of a 15-calendar day waiting period following the required filing of a Notification and Report Form under the HSR Act by Parent, which filing Parent expects to submit on or about March 22, 1999. Accordingly, the waiting period under the HSR Act would expire at 11:59 P.M., New York City time, on or about April 6, 1999, unless early termination of the waiting period is granted or Parent receives a request for additional information or documentary material prior thereto. If either the FTC or the Antitrust Division were to request additional information or documentary material from Parent prior to the expiration of the 15-day waiting period, the waiting period would be extended and would expire at 11:59 P.M., New York City time, on the tenth calendar day after the date of substantial compliance by Parent with such request. Thereafter, the waiting periods could be extended only by court order or by consent of Parent. If either the acquisition of the Shares or the SMG-II Merger is delayed pursuant to a request by the FTC or the Antitrust Division for additional information or documentary material pursuant to the HSR Act, the purchase of and payment for Shares pursuant to the Offer will be deferred until 20 days after the request is substantially complied with, unless the waiting period is terminated sooner by the FTC or the Antitrust Division. See Section 2--"Acceptance for Payment and Payment of Shares". Only one extension of such waiting period pursuant to a request for additional information or documentary material is authorized by the rules promulgated under the HSR Act, except by court order or by consent. However, if the Antitrust Division or the FTC raises substantive issues in connection with a proposed transaction, the parties frequently engage in negotiations with the relevant governmental agency concerning possible means of addressing these issues and may agree to delay consummation of the transaction while such negotiations continue. The Antitrust Division and the FTC frequently scrutinize the legality under the antitrust laws of transactions such as the proposed acquisition of Shares by the Purchaser pursuant to the Offer or the SMG-II Merger. At any time before or after the Purchaser's purchase of Shares, either the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the acquisition of Shares pursuant to the Offer or the SMG-II Merger or seeking divestiture of Shares acquired by the Purchaser or divestiture of substantial assets of Parent, the Company or any of their respective subsidiaries. State attorneys general may also bring legal action under the antitrust laws, and private parties may bring such action under certain circumstances. Parent and the Purchaser believe that the acquisition of Shares by the Purchaser and the SMG-II Merger will not violate the antitrust laws. Nevertheless, there can be no assurance that a challenge to the Offer or the SMG-II Merger on antitrust grounds will not be made or, if a challenge is made, what the result will be. See Section 14--"Conditions of the Offer" for certain conditions to the Offer, including conditions with respect to litigation and certain governmental actions. 49 16. Fees and Expenses. Except as set forth below, neither Parent nor the Purchaser will pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer. Goldman Sachs are acting as the Dealer Managers in connection with the Offer. Goldman Sachs will receive reasonable and customary compensation for their services as Dealer Managers, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under the United States federal securities laws. The Purchaser and Parent have also retained Citibank, N.A., as the Depositary. The Depositary has not been retained to make solicitations or recommendations in its role as Depositary. The Depositary will receive reasonable and customary compensation for its services, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under the United States federal securities laws. In addition, the Purchaser and Parent have retained Morrow & Co., Inc. to act as the Information Agent in connection with the Offer. The Information Agent will receive reasonable and customary compensation for its services, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under the United States federal securities laws. Brokers, dealers, commercial banks and trust companies will be reimbursed by the Purchaser for customary mailing and handling expenses incurred by them in forwarding offering material to their customers. 17. Miscellaneous. The Purchaser is not aware of any jurisdiction where the making of the Offer is prohibited by any administrative or judicial action pursuant to any valid state statute. If the Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of the Shares pursuant thereto, the Purchaser will make a good faith effort to comply with such state statute or seek to have such statute declared inapplicable to the Offer. If, after such good faith effort, the Purchaser cannot comply with any such state statute, the Offer will not be made to (and tenders will not be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by the Dealer Managers or one or more registered brokers or dealers which are licensed under the laws of such jurisdiction. No person has been authorized to give any information or make any representation on behalf of Parent or the Purchaser not contained in this Offer to Purchase or in the Letter of Transmittal and, if given or made, such information or representation must not be relied upon as having been authorized. Parent and the Purchaser have filed with the Commission the Schedule 14D-1, together with exhibits, pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-3 promulgated thereunder, furnishing certain additional information with respect to the Offer, and may file amendments thereto. The Schedule 14D-1 and any amendments thereto, including exhibits, may be inspected at, and copies may be obtained from, the same places and in the manner set forth in Section 7--"Certain Information Concerning the Company" (except that they will not be available at the regional offices of the Commission). Ahold Acquisition, Inc. March 15, 1999 50 SCHEDULE I INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF KONINKLIJKE AHOLD N.V., CROESUS, INC., AHOLD U.S.A., INC. AND AHOLD ACQUISITION, INC. 1. Supervisory Board, Corporate Executive Board and Executive Officers of Koninklijke Ahold N.V. Set forth below is the name, present principal occupation or employment and material occupations, positions, offices or employments for the past five years of each member of the Supervisory Board, the Corporate Executive Board and each executive officer of Koninklijke Ahold N.V. The principal address of Koninklijke Ahold N.V. and, unless indicated below, the current business address for each individual listed below is Albert Heijnweg 1, 1507 EH Zaandam, The Netherlands, Telephone: 011-31-75-6599111. Each such person is, unless indicated below, a citizen of The Netherlands. Members of the Supervisory Board are identified by an asterisk and members of the Corporate Executive Board are identified by two asterisks.
Present Principal Occupation or Employment; Name and Current Material Positions Held During the Past Business Address Five Years ---------------- ------------------------------------------- H. de Ruiter*.................... Chairman of the Supervisory Board of Koninklijke Ahold N.V.; Former Group Managing Director and Managing Director of Royal Dutch Petroleum Company; Member of the Supervisory Board of Royal Dutch Petroleum Company; Member of the Supervisory Board of Heineken N.V.; Member of the Supervisory Board of Wolters Kluwer N.V.; Chairman of the Supervisory Board of Beers N.V.; Chairman of the Supervisory Board of Koninklijke Hoogovens N.V.; Chairman of the Supervisory Board of Koninklijke Pakhoed N.V.; Non-Executive Director of British Biotech; Chairman of the Supervisory Board of Aegon N.V. R.J. Nelissen*................... Vice Chairman of the Supervisory Board of Koninklijke Ahold N.V.; Former Chairman of the Managing Board of ABN/AMRO Holding N.V.; Supervisory Board Member of ABN AMRO Bank N.V.; Supervisory Board Member of N.V. Luchthaven Schiphol; Supervisory Board Member of Koninklijke Boskalis Westminster N.V.; Supervisory Board Member of Koninklijke Ten Cate N.V.; Supervisory Board Member of Mercedes Benz Nederland B.V.; Supervisory Board Member of International Flavors & Fragrances IFF (Nederland) B.V.; Supervisory Board Member of Elsevier N.V. and Reed Elsevier PLC Sir Michael Perry*............... Member of the Supervisory Board of Koninklijke Ahold N.V.; Deputy Chairman of Bass PLC; Chairman of Centrica PLC (formerly British Gas); Chairman of Dunlop Slazenger Group Limited; Non-Executive Director of Marks & Spencer PLC; Chairman of The Shakespeare Globe Trust; Chairman of The International Shakespeare Globe Centre Ltd.; Former Director British Gas PLC; Former Chairman of the Managing Board of Unilever PLC; Former Chairman of United Holdings Ltd.; Former Chairman of The Advertising Association; Former Member of the British Chamber of Commerce (Citizen of the United Kingdom)
Name and Current Present Principal Occupation or Employment; Business Address Material Positions Held During the Past Five Years ---------------- -------------------------------------------------- J.A. van Kemenade*..... Member of the Supervisory Board of Koninklijke Ahold N.V.; Governor-General for the Dutch Province of North-Holland; Former Minister of Education and Science of the Dutch Government; Supervisory Board Member of De Nederlandsche Bank N.V.; Supervisory Board Member of N.V. Bouwfonds Nederlandes S.E. Gemeenten; Member on the Advisory Board of KPMG. A.J. Kranendonk*....... Member of the Supervisory Board of Koninklijke Ahold N.V.; Former President of the Management Board of Friesland W.A.; Chairman of the Association of Dutch Chambers of Commerce; Member of the Supervisory Board of S.C. Johnson Polymer B.V.; Chairman of the Supervisory Board of Athlon N.V.; Member of the Supervisory Board of Lankhorst B.V. R.F. Meyer*............ Member of the Supervisory Board of Koninklijke Ahold N.V.; Professor of Business Administration, Harvard Business School; Chairman of NEDD (Citizen of the United States) L.J.R. de Vink*........ Member of the Supervisory Board of Koninklijke Ahold N.V.; President and Chief Operating Officer of Warner- Lambert Company (Citizen of the United States) C.H. van der Hoeven**.. President of Koninklijke Ahold N.V.; Member of the Supervisory Board of ABN AMRO Bank N.V.; Director of Ahold U.S.A., Inc. J.G. Andreae**......... Executive Vice President of Koninklijke Ahold N.V.; Former President of Albert Heijn B.V.; President of the Supervisory Board of S.V.M.; Former Member of the Supervisory Board of KLM-catering; Co-chairman of ECR Europe; Co-chairman of ECR NL; Director of Ahold U.S.A., Inc. A.M. Meurs**........... Executive Vice President & CFO of Koninklijke Ahold N.V.; Supervisory Director of Disco Ahold International Holdings N.V.; Director and Vice President of Ahold Americas Holdings, Inc.; Former Senior Vice President Business Development of Koninklijke Ahold N.V.; Former Senior Vice President of Finance Koninklijke Ahold N.V.; Former Vice President of Finance Koninklijke Ahold N.V.; Member of the Supervisory Board of Van Den Boom Groep; Member of the Supervisory Board of Van der Hoop Effectenbank N.V.; Director and Executive Vice President of Ahold U.S.A., Inc. A.S. Noddle**.......... Executive Vice President of Koninklijke Ahold N.V.; Supervisory Director of Disco Ahold International Holdings N.V.; Former President and Chief Executive Officer of Giant Food Stores, Inc.; Director of Ahold U.S.A., Inc. (Citizen of the United States)
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Name and Current Present Principal Occupation or Employment; Business Address Material Positions Held During the Past Five Years ---------------- -------------------------------------------------- R.G. Tobin**....... Executive Vice President of Koninklijke Ahold N.V.; Director and President of Ahold Americas Holdings, Inc.; Chairman, Director, President and Chief Executive officer of Ahold U.S.A., Inc.; President and Chief Executive Officer of Croesus, Inc.; Former Chairman, President and Chief Executive Officer of The Stop & Shop Companies, Inc. (Citizen of the United States). R. Zwartendijk**... Executive Vice President of Koninklijke Ahold N.V.; Supervisory Director of Disco Ahold International Holdings N.V.; President of Luis Paez S.A.; Former Member of the Supervisory Board of Schuitema N.V.; Member of the Supervisory Board of Numico N.V.; President of the Supervisory Board of A.C. Holding N.V.; Director of Ahold U.S.A., Inc. N.L.J. Berger...... Corporate Secretary of Koninklijke Ahold N.V.; Former Deputy General Counsel of Koninklijke Ahold N.V. A.J. Brouwer....... Senior Vice President of Management Development and Organization of Koninklijke Ahold N.V.; Former Vice President of Management Development and Organization of Koninklijke Ahold N.V. A. Buitenhuis...... Senior Vice President Finance and Fiscal Affairs of Koninklijke Ahold N.V.; Former Senior Vice President of Fiscal Affairs of Koninklijke Ahold N.V. P.P.J. Butzelaar... Senior Vice President and General Counsel of Koninklijke Ahold N.V.; Former Corporate Secretary of Koninklijke Ahold N.V.; Member of the Supervisory Board of DCE Holding B.V. P.P.M. Ekelschot... Senior Vice President of Internal Audit of Koninklijke Ahold N.V.; Former Vice President of Internal Audit of Koninklijke Ahold N.V. H.Gobes............ Senior Vice President of Communications of Koninklijke Ahold N.V. M.J. Dorhout Mees.. Senior Vice President of Business Development of Koninklijke Ahold N.V.; Former Senior Vice President of Sales & Services of Albert Heijn B.V.; Former Deputy Director of Customer Services of Albert Heijn B.V. L.A.P.A. Verhelst.. Senior Vice President of Administration of Koninklijke Ahold N.V.; Former President of Pays-Bas Property Fund N.V.; Former Member of the Executive Board of Koninklijke Bols Wessanen N.V.
2. Directors and Executive Officers of Croesus, Inc. Set forth below is the name, present principal occupation or employment and material occupations, positions, offices or employments for the past five years of each member of the Board of Directors and each executive officer of Croesus, Inc. The principal address of Croesus, Inc. is 913 N. Market St., Suite 209, Wilmington, Delaware 19801, Telephone (302) 576-2889. The current business address for each individual listed below is Albert Heijnweg 1,1507, Zaandam, The Netherlands, Telephone: 011-31-75-6599111. Each such person is, unless indicated below, a citizen of the United States. I-3
Present Principal Occupation or Employment; Name and Current Material Positions Held During the Past Business Address Five Years ---------------- ------------------------------------------- F.B. Jacobs...................... Director of Croesus, Inc.; Vice President of Griffin Corporate Services; Former Vice President of Delaware Trust Capital Management D.F. Lindley..................... Director of Croesus, Inc.; Partner for Duane, Morris, and Heckscher LLP B.A. Fields...................... Director of Croesus, Inc. and Former Assistant Secretary of Ahold U.S.A., Inc.; Director of Ahold Finance U.S.A. Inc. R.G. Tobin....................... President and Chief Executive Officer of Croesus, Inc.; Executive Vice President of Koninklijke Ahold N.V.; Director and President of Ahold Americas Holdings, Inc.; Chairman, Director, President and Chief Executive Officer of Ahold U.S.A., Inc.; Former Chairman, President and Chief Executive Officer of The Stop & Shop Companies, Inc. M.J. Collins, Jr................. Executive Vice President of Croesus, Inc.; Director and Executive Vice President-- Support Service of Ahold U.S.A., Inc.; President and Chief Executive Officer of BI-LO, Inc. G.W. Preston..................... Executive Vice President of Croesus, Inc.; Executive Vice President--Human Resources of Ahold U.S.A., Inc.; Executive Vice President--Human Resources of Ahold USA Support Services, Inc.; Executive Vice President--Human Resources of BI-LO, Inc. E.J. Smith....................... Director, Executive Vice President and Secretary of Croesus, Inc.; Executive Vice President--Finance and Former Secretary of Ahold U.S.A., Inc.; Secretary and Treasurer of Ahold Americas Holdings, Inc.; Former Secretary and Executive Vice President of Giant Food Stores, Inc. A.M. Meurs....................... Executive Vice President of Croesus, Inc.; Director and Executive Vice President of Ahold U.S.A., Inc.; Executive Vice President & CFO of Koninklijke Ahold N.V.; Director and Vice President of Ahold Americas Holdings, Inc.; Supervisory Director of Disco Ahold International Holdings N.V.; Former Senior Vice President--Business Development of Koninklijke Ahold N.V.; Former Senior Vice President of Finance Koninklijke Ahold N.V.; Former Vice President of Finance Koninklijke Ahold N.V.; Member of the Supervisory Board of Van Den Boom Groep; Member of the Supervisory Board of Van der Hoop Effectenbank N.V. (Citizen of The Netherlands).
3. Directors and Executive Officers of Ahold U.S.A., Inc. Set forth below is the name, present principal occupation or employment and material occupations, positions, offices or employments for the past five years of each member of the Board of Directors and each executive officer of Ahold U.S.A., Inc. The principal address of Ahold U.S.A., Inc. is One Atlanta Plaza, East Paces Ferry Road, Suite 2575, Atlanta, Georgia 30326. Unless indicated below, the current business address for each individual listed below is Albert Heijnweg 1, 1507 EH Zaandam, The Netherlands, Telephone: 011-31-75-6599111. Each such person is, unless indicated below, a citizen of The Netherlands. I-4
Present Principal Occupation or Employment; Name and Current Material Positions Held During the Past Business Address Five Years ---------------- ------------------------------------------- R.G. Tobin....................... Chairman, Director, President and Chief Executive Officer of Ahold U.S.A., Inc. Executive Vice President of Koninklijke Ahold N.V.; Director and President of Ahold Americas Holdings, Inc.; President and Chief Executive Officer of Croesus, Inc.; Former Chairman, President and Chief Executive Officer of The Stop & Shop Companies, Inc. (Citizen of the United States). E.J. Smith....................... Executive Vice President--Finance and Former Secretary of Ahold U.S.A., Inc.; Secretary and Treasurer of Ahold Americas Holdings, Inc.; Former Secretary and Executive Vice President of Giant Food Stores, Inc. (Citizen of the United States) B.A. Fields...................... Director of Ahold U.S.A, Inc. and Former Assistant Secretary of Ahold; U.S.A., Inc.; Director of Croesus, Inc. (Citizen of the United States) M.J. Collins, Jr................. Director and Executive Vice President of Ahold U.S.A., Inc.; Executive Vice President of Croesus, Inc.; President and Chief Executive Officer of BI-LO, Inc. (Citizen of the United States) G.W. Preston..................... Executive Vice President--Human Resources of Ahold U.S.A., Inc.; Executive Vice President--Human Resources of Ahold USA Support Services, Inc.; Executive Vice President of Croesus, Inc.; Executive Vice President--Human Resources of BI-LO, Inc. (Citizen of the United States) A.M. Meurs....................... Director and Executive Vice President of Ahold U.S.A., Inc.; Executive Vice President & CFO of Koninklijke Ahold N.V.; Director and Vice President of Ahold Americas Holdings, Inc.; Supervisory Director of Disco Ahold International Holdings N.V.; Former Senior Vice President Business Development of Koninklijke Ahold N.V.; Former Senior Vice President of Finance Koninklijke Ahold N.V.; Former Vice President of Finance Koninklijke Ahold N.V.; Member of the Supervisory Board of Van Den Boom Groep; Member of the Supervisory Board of Van der Hoop Effectenbank N.V.; Executive Vice President of Croesus, Inc. J.G. Andreae..................... Director of Ahold U.S.A., Inc.; Executive Vice President of Koninklijke Ahold N.V.; Former President of Albert Heijn B.V.; President of the Supervisory Board of S.V.M.; Former Member of the Supervisory Board of KLM-catering; Co-chairman of ECR Europe; Co-chairman of ECR NL A.S. Noddle...................... Director of Ahold U.S.A., Inc.; Executive Vice President of Koninklijke Ahold N.V.; Former President and Chief Executive Officer of Giant Food Stores, Inc., Supervisory Director of Disco Ahold International Holdings N.V. (Citizen of the United States)
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Present Principal Occupation or Employment; Name and Current Material Positions Held During the Past Business Address Five Years ---------------- ------------------------------------------- C.H. van der Hoeven.............. Director of Ahold U.S.A., Inc.; President of Koninklijke Ahold N.V.; Member of the Supervisory Board of ABN AMRO Bank N.V. R. Zwartendijk................... Director of Ahold U.S.A., Inc.; Executive Vice President of Koninklijke Ahold N.V.; Supervisory Director of Disco Ahold International Holdings N.V.; President of Luis Paez S.A.; Former Member of the Supervisory Board of Schuitema N.V.; Member of the Supervisory Board of Numico N.V.; President of the Supervisory Board of A.C. Holding N.V. M.F. Smith....................... Assistant Secretary and Assistant Treasurer of Ahold U.S.A., Inc. (Citizen of the United States). K.A. Krahnke..................... Secretary of Ahold U.S.A., Inc. (Citizen of the United States). F.B. Jacobs, II.................. Vice President and Treasurer of Ahold U.S.A., Inc. F. Gauthier...................... Assistant Secretary of Ahold U.S.A., Inc. 4. Directors and Executive Officers of Ahold Acquisition, Inc. Set forth below is the name, present principal occupation or employment and material occupations, positions, offices or employments for the past five years of each director and executive officer of Ahold Acquisition, Inc. Each person identified below has held his position since the formation of Ahold Acquisition, Inc. in March 1999. The principal address of Ahold Acquisition, Inc. is 1013 Center Road, Wilmington, Delaware 19805, Telephone: (800) 927- 9800. The current business address for each individual listed below is Albert Heijnweg 1, 1507 EH Zaandam, The Netherlands, Telephone 011-31-75-6599111. Each such person is, unless indicated below, a citizen of The Netherlands. Directors are identified by an asterisk. R.G. Tobin*...................... See above A.M. Meurs*...................... See above A.H.P.M. van Tielraden*.......... Vice President and Deputy General Counsel of Koninklijke Ahold N.V.; Former Director of Legal Affairs Hagemeyer N.V.; Former Senior Legal Advisor Unilever Nederland B.V.; Former General Counsel Quest International
5. Ownership of Shares by Directors and Executive Officers. To the best knowledge of Koninklijke Ahold N.V., Croesus, Inc., Ahold U.S.A., Inc. and Ahold Acquisition, Inc., none of the persons listed on this Schedule I beneficially owns or has a right to acquire directly or indirectly any Shares, and none of the persons listed on this Schedule I has effected any transactions in the Shares during the past 60 days. I-6 Facsimile copies of the Letter of Transmittal, properly completed and duly signed, will be accepted. The Letter of Transmittal, certificates for the Shares and any other required documents should be sent by each holder of Shares or his broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of the addresses set forth below: The Depositary for the Offer is: Citibank, N.A.
By Hand: By Mail: By Overnight Courier: Citibank, N.A. Citibank, N.A. Citibank, N.A. Corporate Actions Corporate Actions Corporate Actions 111 Wall Street, Suite 4660 111 Wall Street, 5th Floor Window P.O. Box 2544 5th Floor Window New York, New York 10043 Jersey City, New Jersey 07303-2544 New York, New York 10043
For Information: (877) 248-4237 Questions and requests for assistance may be directed to the Information Agent or the Dealer Managers at their respective addresses and telephone numbers as set forth below. Additional copies of this Offer to Purchase, the Letter of Transmittal, or other related tender offer materials may be obtained from the Information Agent or from brokers, dealers, commercial banks or trust companies. The Information Agent for the Offer is: MORROW & CO., INC. 445 Park Avenue 5th Floor New York, New York 10022 Call Collect (212) 754-8000 Toll Free: (800) 566-9061 Bankers and Brokerage Firms, Please Call: (800) 662-5200 The Dealer Managers for the Offer are: Goldman, Sachs & Co. 85 Broad Street New York, New York 10004 Call Collect (212) 357-6380 Toll Free: (877) 686-5059 EX-99.(A)(2) 3 LETTER OF TRANSMITTAL Exhibit (a)(2) Letter of Transmittal To Tender Shares of $3.52 Cumulative Exchangeable Redeemable Preferred Stock of Supermarkets General Holdings Corporation Pursuant to the Offer to Purchase dated March 15, 1999 by Ahold Acquisition, Inc. An Indirect Wholly-Owned Subsidiary of Koninklijke Ahold N.V. (Royal Ahold) THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, APRIL 9, 1999 UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: Citibank, N.A. By Hand: By Mail: By Overnight Courier: Citibank, N.A. Citibank, N.A. Citibank, N.A. Corporate Actions Corporate Actions Corporate Actions Suite 4660 111 Wall Street, 5th 111 Wall Street, 5th P.O. Box 2544 Floor Window Floor Window Jersey City, New Jersey New York, New York New York, New York 07303-2544 10043 10043 For Information: (877) 248-4237 DESCRIPTION OF SHARES TENDERED - ------------------------------------------------------
Name(s) and Address(es) of Registered Holder(s) (Please fill in, if blank, exactly as name(s) appear(s) on the Shares Tendered certificate(s)) (Attach additional list if necessary) - ------------------------------------------------------ Total Number of Shares Share Evidenced by Number Certificate Share of Shares Number(s) Certificate(s) Tendered:* -------- -------- -------- -------- -------- -------- Total Shares.. - ------------------------------------------------------
* Unless otherwise indicated, it will be assumed that all Shares evidenced by any Share Certificate(s) delivered to the Depositary are being tendered. See Instruction 4. DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be completed only by stockholders holding certificates evidencing Shares (as defined below). If you hold Shares in book-entry form, you may tender your Shares by book-entry transfer to the account maintained by the Depositary at The Depository Trust Company ("DTC") (the "Book-Entry Transfer Facility"), along with an Agent's Message (as defined in the Offer to Purchase), pursuant to the procedures set forth in Section 3--"Procedures for Tendering Shares" of the Offer to Purchase. Stockholders who tender Shares by book-entry transfer are referred to herein as "Book-Entry Stockholders" and other stockholders are referred to herein as "Certificate Stockholders." Stockholders whose certificates evidencing Shares ("Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other documents required hereby to the Depositary on or prior to the Expiration Date (as defined in Section 1--"Terms of the Offer" of the Offer to Purchase), or who cannot comply with the book-entry transfer procedures on a timely basis, may nevertheless tender their Shares according to the guaranteed delivery procedure set forth in Section 3--"Procedures for Tendering Shares" of the Offer to Purchase. See Instruction 2 of this Letter of Transmittal. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Depositary for this Offer (as defined herein). [_]CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) ____________________________________________ Window Ticket Number (if any) ______________________________________________ Date of Execution of Notice of Guaranteed Delivery _________________________ Name of Institution which Guaranteed Delivery ______________________________ NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to Ahold Acquisition, Inc., a Delaware corporation (the "Purchaser") and an indirect wholly-owned subsidiary of Koninklijke Ahold N.V., a public company with limited liability incorporated under the laws of The Netherlands with its corporate seat in Zaandam (Municipality Zaanstad), The Netherlands ("Parent"), the above-described shares of $3.52 Cumulative Exchangeable Redeemable Preferred Stock, par value $0.01 per share, (the "Shares"), of Supermarkets General Holdings Corporation, a Delaware corporation (the "Company"), pursuant to the Purchaser's offer to purchase all of the issued and outstanding Shares at a price of $38.25 per Share, net to the seller in cash, without interest thereon (the "Offer Price"), upon the terms and subject to the conditions set forth in the Offer to Purchase, dated March 15, 1999 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which together with the Offer to Purchase, as they may be amended and -2- supplemented from time to time, constitute the "Offer"). The undersigned understands that the Purchaser reserves the right to assign to Parent, or any direct or indirect wholly-owned subsidiary of Parent, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but the undersigned further understands that any such assignment will not relieve the Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. Upon the terms and conditions of the Offer, subject to, and effective upon, acceptance for payment of and payment for the Shares tendered herewith in accordance with the terms of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Purchaser, all right, title and interest in and to all of the Shares that are being tendered hereby and any and all dividends, distributions, rights, other Shares and other securities issued or issuable in respect thereof on or after March 9, 1999 (collectively, "Distributions"), and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares and all Distributions with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest) to (i) deliver such Share Certificates (as defined herein) and all Distributions or transfer ownership of such Shares and all Distributions on the account books maintained by the Book-Entry Transfer Facility, together in either such case with all accompanying evidences of transfers and authenticity, to or upon the order of the Purchaser, (ii) present such Shares and all Distributions for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares and all Distributions, all in accordance with the terms and the conditions of the Offer. The undersigned hereby irrevocably appoints the designees of the Purchaser, and each of them, the attorneys-in-fact and proxies of the undersigned, each with full power of substitution, to vote in such manner as each such attorney and proxy or any substitute thereof shall deem proper in the sole discretion of such attorney-in-fact and proxy or such substitute, and otherwise act (including pursuant to written consent) with respect to all of the Shares tendered hereby and all Distributions which have been accepted for payment by the Purchaser prior to the time of such vote or action, which the undersigned is entitled to vote at any meeting of stockholders (whether annual or special and whether or not an adjourned meeting) of the Company or otherwise. This proxy and power of attorney is coupled with an interest in the Shares and is irrevocable and is granted in consideration of, and is effective upon, the acceptance for payment of such Shares and all Distributions by the Purchaser in accordance with the terms of the Offer. Such acceptance for payment shall revoke any other proxy granted by the undersigned at any time with respect to such Shares and all Distributions and no subsequent proxies will be given (or, if given, will not be deemed effective) with respect thereto by the undersigned. The undersigned understands that in order for Shares to be deemed validly tendered pursuant to the Offer, immediately upon the Purchaser's acceptance of such Shares and all Distributions for payment, the Purchaser or its designee must be able to exercise full voting rights with respect to such Shares and all Distributions, including, without limitation, voting at any meeting of the Company's stockholders then scheduled. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares and all Distributions tendered hereby and that when the same are accepted for payment by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances, and the same will not be subject to any adverse claim. The undersigned will, upon request, execute and deliver any additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete the sale, assignment, and transfer of the Shares and all Distributions tendered hereby. In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of the Purchaser any and all Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer and, pending such remittance or appropriate assurance thereof, the Purchaser shall be entitled to all rights and privileges as owner of any such Distributions and may withhold the entire purchase price or deduct -3- from the purchase price the amount or value thereof, as determined by the Purchaser in its sole discretion. No authority herein conferred or agreed to be conferred shall be affected by, and all such authority shall survive, the death or incapacity of the undersigned. All obligations of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Subject to the withdrawal rights set forth in Section 4-- "Withdrawal Rights" of the Offer to Purchase, the tender of Shares hereby made is irrevocable. The undersigned understands that tenders of Shares pursuant to any of the procedures described in Section 3--"Procedures for Tendering Shares" of the Offer to Purchase and in the instructions hereto will constitute the undersigned's acceptance of the terms and conditions of the Offer. The Purchaser's acceptance for payment of such Shares will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions set forth in the Offer. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, the Purchaser may not be required to accept for payment any of the Shares tendered hereby. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the purchase price and/or return any Share Certificates not tendered or not accepted for payment in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price and/or return any Share Certificates not tendered or not accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered." In the event that both the Special Delivery Instructions and the Special Payment Instructions are completed, please issue the check for the purchase price and/or issue any Share Certificates not so tendered or accepted for payment in the name of, and deliver said check and/or return such certificates to, the person or persons so indicated. The undersigned recognizes that the Purchaser has no obligation, pursuant to the Special Payment Instructions, to transfer any Shares from the name of the registered holder thereof if the Purchaser does not accept for payment any of the Shares so tendered. SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (See Instructions 1,5,6 and 7) (See Instructions 1,5,6 and 7) To be completed ONLY if To be completed ONLY if certificate(s) for Shares not certificate(s) for Shares not tendered or not purchased and/or tendered or not purchased and/or the check for the purchase price the check for the purchase price of Shares purchased are to be of Shares purchased are to be sent issued in the name of someone to someone other than the other than the undersigned. undersigned, or to the undersigned at an address other than that shown above. Issue check and/or certificate(s) to: Mail check and/or certificate(s) to: Name: ___________________________ Please Type or Print Name: ___________________________ Address: ________________________ Please Type or Print --------------------------------- (Include Zip Code) Address: ________________________ --------------------------------- --------------------------------- (Tax Identification or Social (Include Zip Code) Security No.)* --------------------------------- (See Substitute Form W-9 included (Tax Identification or Social herewith) Security No.) ------- (See Substitute Form W-9 included * Signature Guarantee required. herewith) -4- IMPORTANT STOCKHOLDER(S) SIGN HERE (See instructions 1 and 5) (Please Complete Substitute Form W-9 included herewith) Signature(s) of Holder(s): _________________________________________________ ---------------------------------------------------------------------------- Date: _________________________________________ , 1999 ------------------------------------ (Tax Identification and Social Security No.) (Must be signed by registered holder(s) exactly as name(s) appear(s) on stock certificate(s) or on a security position listing, or by person(s) authorized to become registered holder(s) by certificate(s) and documents enclosed with this Letter of Transmittal. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or other person acting in a fiduciary or representative capacity, please provide the following information and see Instruction 5.) Name(s): ___________________________________________________________________ (Please Print) Capacity (Full Title): _____________________________________________________ Address: ___________________________________________________________________ ---------------------------------------------------------------------------- (Include Zip Code) ------------------------------------ (Area Code and Telephone No.) Guarantee of Signature(s) (See Instructions 1 and 5) Authorized Signature: ______________________________________________________ Name: ______________________________________________________________________ (Please Type or Print) Title: _____________________________________________________________________ Name of Firm: ______________________________________________________________ Address: ___________________________________________________________________ (Include Zip Code) Name of Firm: ______________________________________________________________ Area Code and Telephone Number: ____________________________________________ Date: _________________________________________ , 1999 -5- INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a financial institution (including most banks, savings and loan associations and brokerage houses) which is a participant in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (an "Eligible Institution"). Signatures on this Letter of Transmittal need not be guaranteed (a) if this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered herewith and such holder(s) have not completed the instruction entitled "Special Payment Instructions" on this Letter of Transmittal or (b) if such Shares are tendered for the account of an Eligible Institution. See Instruction 5 of this Letter of Transmittal. 2. Delivery of Letter of Transmittal and Share Certificates or Book-Entry Confirmations. This Letter of Transmittal is to be used if Share Certificates are to be forwarded herewith. Share Certificates evidencing all physically tendered Shares, along with this Letter of Transmittal or a facsimile thereof, properly completed and duly executed with any required signature guarantees, and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth herein on or prior to the Expiration Date (as defined in Section 1--"Terms of the Offer" of the Offer to Purchase). Shares held through the Book-Entry Transfer Facility must be tendered to the Depositary by means of delivery of an Agent's Message (as more fully described in the Offer to Purchase). Stockholders whose Share Certificates are not immediately available or who cannot deliver their Share Certificates and all other required documents to the Depositary on or prior to the Expiration Date or who cannot complete the procedures for book-entry transfer on a timely basis may nevertheless tender their Shares by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in Section 3--"Procedures for Tendering Shares" of the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by the Purchaser must be received by the Depositary on or prior to the Expiration Date; and (iii) Share Certificates, along with a Letter of Transmittal, properly completed and duly executed with any required signature guarantees (or a facsimile hereof, properly completed and duly executed with any required signature guarantees, and all other documents required by this Letter of Transmittal, must be received by the Depositary within three New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery. In the case of Shares held through the Book-Entry Transfer Facility, the Notice of Guaranteed Delivery must be delivered to the Depositary by a participant in the Book-Entry Transfer Facility by means of an Agent's Message (as defined in the Offer to Purchase) via the confirmation system of the Book-Entry Transfer Facility confirmation system. If Share Certificates are forwarded to the Depositary in multiple deliveries, a properly completed and duly executed Letter of Transmittal (or facsimile hereof) must accompany each such delivery. -6- The method of delivery of this Letter of Transmittal, Share Certificates and all other required documents, including delivery through the Book-Entry Transfer Facility, is at the option and risk of the tendering stockholder. Delivery will be deemed made only when actually received by the Depositary. If such delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to assure timely delivery. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering stockholders, by execution of this Letter of Transmittal or a facsimile hereof, waive any right to receive any notice of the acceptance of their Shares for payment. 3. Inadequate Space. If the space provided under "Description of Shares Tendered" is inadequate, the Share Certificate numbers and/or the number of Shares should be listed on a separate schedule and attached hereto. 4. Partial Tenders (Applicable to Certificate Stockholders Only). If fewer than all the Shares evidenced by any Share Certificate submitted are to be tendered, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered." In such cases, the Company's registrar and transfer agent shall cause new Share Certificate(s) evidencing the remainder of the Shares that were evidenced by Share Certificate(s) delivered to the Depositary to be sent to the person signing this Letter of Transmittal, unless otherwise provided in the box entitled "Special Delivery Instructions" on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by Share Certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holders of the Shares tendered hereby, the signature must correspond with the names as written on the face of the certificates without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any of the tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of Shares. If this Letter of Transmittal or any Share Certificate or stock power is signed by a trustee, executor, administrator, attorney-in-fact, officer of a corporation or other person acting in fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Purchaser of such person's authority to so act must be submitted. If this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment is to be made to, or Share Certificates evidencing Shares not tendered or purchased are to be issued in the name of, a person other than the registered holder(s). In such case, the signature(s) on the applicable Letter of Transmittal must be guaranteed by an Eligible Institution. -7- If this Letter of Transmittal is signed by a person other than the registered holder of the Shares tendered hereby, the Share Certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holder or holders appear(s) on such Share Certificate(s). Signatures on such Share Certificates or stock powers must be guaranteed by an Eligible Institution. 6. Stock Transfer Taxes. Except as otherwise provided in this Instruction 6, the Purchaser will pay or cause to be paid any stock transfer taxes with respect to the transfer and sale of purchased Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price of any Shares purchased is to be made to, or, in the circumstances permitted hereby, if Share Certificates for Shares not tendered or purchased are to be registered in the name of, any person other than the registered holder, or if tendered Share Certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder or such person) payable on account of the transfer to such person will be deducted from the purchase price if satisfactory evidence of the payment of such taxes, or exemption therefrom, is not submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Share Certificates listed in this Letter of Transmittal. 7. Special Payment and Delivery Instructions. If you request a check for the purchase price to be issued in the name of, and/or Share Certificates for Shares not tendered or not accepted for payment are to be issued or returned to, a person other than the signer of this Letter of Transmittal, please complete the box entitled "Special Payment Instructions" and obtain the required signature guarantees. If you request a check and/or such Share Certificates are to be mailed to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, please complete the box entitled "Special Delivery Instructions". 8. Requests for Assistance or Additional Copies. Questions or requests for assistance may be directed to, or additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and other tender offer materials may be obtained from, the Information Agent or the Dealer Managers at their respective addresses set forth below or from your broker, dealer, commercial bank or trust company. 9. Substitute Form W-9. Under the United States federal income tax backup withholding rules, unless an exemption applies under the applicable law and regulations, 31% of the gross proceeds payable to a shareholder or other payee pursuant to the Offer must be withheld and remitted to the United States Treasury, unless the shareholder or other payee provides his or her taxpayer identification number ("TIN") (employer identification number or social security number) to the Depositary and certifies that such number is correct. Therefore, each tendering shareholder should complete and sign the Substitute Form W-9 included as part of the Letter of Transmittal so as to provide the information and certification necessary to avoid backup withholding, unless such shareholder otherwise establishes to the satisfaction of the Depositary that it is not subject to backup withholding. Certain shareholders (including, among others, all corporations and certain foreign shareholders) are not subject to these backup withholding and -8- reporting requirements. In order for a foreign shareholder to qualify as an exempt recipient, that shareholder should submit an IRS Form W-8 or a Substitute Form W-8, signed under penalties of perjury, attesting to that shareholder's exempt status. Such statements can be obtained from the Depositary. Failure to provide the information on the form may subject the tendering shareholder to 31% United States federal income tax withholding on the payment of the purchase price. If the tendering shareholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, such shareholder should write "Applied For" in the space for the TIN in Part 1 of the Substitute Form W-9, sign and date the form and provide it to the Depositary. Notwithstanding that "Applied For" is written on Part 1 and the certification is completed, the Depositary will withhold 31% of all payments made prior to the time a properly certified TIN is provided. 10. Lost or Destroyed Certificates. If any Share Certificates have been lost or destroyed, the stockholder should promptly notify the Company's transfer agent. The stockholder will then be instructed as to the procedure to be followed in order to replace the Share Certificates. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed Share Certificates have been followed. Important: This Letter of Transmittal or a facsimile hereof together with Share Certificates and all other required documents or the Notice of Guaranteed Delivery must be received by the Depositary on or prior to the Expiration Date. -9- TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS (See Instruction 9) PAYER'S NAME: Citibank, N.A. - -------------------------------------------------------------------------------- Part 1--PLEASE PROVIDE YOUR Social Security Numberor TIN IN THE BOX AT RIGHT AND Employer Identification CERTIFY BY SIGNING AND Number: DATING BELOW SUBSTITUTE Form W-9 ---------------------- Department of Part 2--Certification--Under penalties of perjury, I the Treasury certify that: Internal Revenue -------------------------------------------------------- Service (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), and Payer's Request for (2) I am not subject to backup withholding because Taxpayer (i) I am exempt from backup withholding, (ii) I Identification have not been notified by the Internal Revenue Number ("TIN") Service (the "IRS") that I am subject to backup and Certification withholding as a result of a failure to report all interest or dividends, or (iii) the IRS has notified me that I am no longer subject to backup withholding. Certification Instructions--You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of under-reporting interest or dividends on your tax return. -------------------------------------------------------- SIGNATURE __________________________ DATE _____________ NAME (Please Print) ___________________________________ ADDRESS _______________________________________________ CITY, STATE AND ZIP CODE ______________________________ NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. -10- The Information Agent for the Offer is: MORROW & CO., INC. 445 Park Avenue, 5th Floor New York, New York 10022 Toll Free (800) 566-9061 Call Collect (212) 754-8000 Banks and Brokerage Firms Please Call: (800) 662-5200 The Dealer Managers for the Offer are: Goldman, Sachs & Co. 85 Broad Street New York, New York 10004 Call Collect: (212) 357-6380 Toll Free: (877) 686-5059 EX-99.(A)(3) 4 FORM OF LETTER TO BROKERS, DEALERS Exhibit (a)(3) Offer to Purchase for Cash All of the Outstanding Shares of $3.52 Cumulative Exchangeable Redeemable Preferred Stock of Supermarkets General Holdings Corporation at $38.25 Net Per Share by Ahold Acquisition, Inc. An Indirect Wholly-Owned Subsidiary of Koninklijke Ahold N.V. (Royal Ahold) THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, APRIL 9, 1999 UNLESS THE OFFER IS EXTENDED. March 15, 1999 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by Ahold Acquisition, Inc., a Delaware corporation (the "Purchaser") and an indirect wholly-owned subsidiary of Koninklijke Ahold N.V. (Royal Ahold), a public company with limited liability incorporated under the laws of The Netherlands with its corporate seat in Zaandam (Municipality Zaanstad), The Netherlands (the "Parent"), to act as Dealer Managers in connection with the Purchaser's offer to purchase all outstanding shares of the $3.52 Cumulative Exchangeable Redeemable Preferred Stock, par value $0.01 per share (the "Shares"), of Supermarkets General Holdings Corporation, a Delaware corporation (the "Company"), at a price of $38.25 per Share, net to the seller in cash, without interest thereon (the "Offer Price"), upon the terms and subject to the conditions set forth in the Offer to Purchase, dated March 15, 1999 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, as they may be amended and supplemented from time to time, together constitute the "Offer"), copies of which are enclosed herewith. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares in your name or in the name of your nominee. Enclosed herewith for your information and forwarding to your clients are copies of the following documents: 1. The Offer to Purchase dated March 15, 1999. 2. The Letter of Transmittal to tender Shares for your use and for the information of your clients. Facsimile copies of the Letter of Transmittal may be used to tender Shares. 3. A letter to stockholders of the Company from James Donald, Chairman of the Board, President, and Chief Executive Officer of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by the Company and mailed to stockholders of the Company. 4. The Notice of Guaranteed Delivery for Shares to be used to accept the Offer if the procedures for tendering Shares set forth in the Offer to Purchase cannot be completed on a timely basis. 5. A printed form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer. 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, APRIL 9, 1999 UNLESS THE OFFER IS EXTENDED. Please note the following: 1. The tender price is $38.25 per Share, net to the seller in cash, without interest thereon, as set forth in the Introduction to the Offer to Purchase. 2. The Offer is subject to there being validly tendered and not properly withdrawn prior to the Expiration Date (as defined in the Offer to Purchase) a number of Shares which, together with shares previously acquired by Parent, any direct or indirect subsidiary of Parent (including the Purchaser), the Company or any direct or indirect subsidiary of the Company, represent at least 66 2/3% percent of all of the issued and outstanding Shares on a fully diluted basis and certain other conditions. See the Introduction and Sections 1--"Terms of the Offer" and 14-- "Conditions of the Offer" of the Offer to Purchase. 3. The Offer is being made for all of the issued and outstanding Shares. 4. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares by the Purchaser pursuant to the Offer. However, federal income tax backup withholding at a rate of 31% may be required, unless an exemption is available or unless the required tax identification information is provided. See Instruction 9 of the Letter of Transmittal. 5. The Offer and the withdrawal rights will expire at 12:00 midnight, New York City time, on Friday, April 9, 1999 unless the Offer is extended. 6. The Board of Directors of the Company (two members of which were elected by the holders of the Shares, voting as a separate class) has unanimously determined that each of the Offer and the subsequent merger of the Company with and into SMG-II Holdings Corporation is fair to, and in the best interests of, the holders of the Shares and unanimously recommends that the holders of the Shares accept the Offer and tender their Shares pursuant to the Offer. 7. Notwithstanding any other provision of the Offer, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (i) certificates evidencing such Shares (the "Share Certificates"), along with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), including any required signature guarantees, or (ii) if such Shares are held in book- entry form, timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Shares into the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility") along with an Agent's Message (as defined in the Offer to Purchase), pursuant to the procedures set forth in Section 3--"Procedures for Tendering Shares" of the Offer to Purchase and (iii) any other documents required by the Letter of Transmittal. Accordingly, payment may not be made to all tendering stockholders at the same time depending upon when Share Certificates are actually received by the Depositary. 2 In order to take advantage of the Offer (i) a duly executed and properly completed Letter of Transmittal (and any required signature guarantee or other required documents) or an Agent's Message in the case of Shares held in book- entry form should be sent to the Depositary and (ii) Share Certificates representing the tendered Shares or a timely Book-Entry Confirmation should be delivered to the Depositary in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. If holders of Shares wish to tender, but it is impracticable for them to forward their Share Certificates or other required documents or complete the procedures for book-entry transfer prior to the Expiration Date, a tender may be effected by following the guaranteed delivery procedures specified in Section 3--"Procedures for Tendering Shares" of the Offer to Purchase. The Purchaser will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer (other than the Dealer Managers, the Depositary and the Information Agent as described in the Offer to Purchase). The Purchaser will, however, upon request, reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. The Purchaser will pay or cause to be paid any transfer taxes payable on the transfer of Shares to it, except as otherwise provided in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Offer should be addressed to Goldman, Sachs & Co., the Dealer Managers for the Offer, at 85 Broad Street, New York, New York 10004, telephone number (212) 357-6380, or to Morrow & Co., Inc., the Information Agent for the Offer, at 445 Park Avenue, 5th Floor, New York, New York 10022, telephone number (212) 754-8000. Requests for copies of the enclosed materials may also be directed to the Dealer Managers or to the Information Agent at the above addresses and telephone numbers. Very truly yours, Goldman, Sachs & Co. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, PARENT, THE COMPANY, THE DEALER MANAGERS, THE DEPOSITARY, THE INFORMATION AGENT OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. 3 EX-99.(A)(4) 5 FORM OF LETTER USED BY BROKER, DEALERS TO CLIENTS Exhibit (a)(4) Offer to Purchase for Cash All of the Outstanding Shares of $3.52 Cumulative Exchangeable Redeemable Preferred Stock of Supermarkets General Holdings Corporation at $38.25 Net Per Share by Ahold Acquisition, Inc. An Indirect Wholly-Owned Subsidiary of Koninklijke Ahold N.V. (Royal Ahold) THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, APRIL 9, 1999 UNLESS THE OFFER IS EXTENDED. March 15, 1999 To Our Clients: Enclosed for your consideration are the Offer to Purchase, dated March 15, 1999 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as they may be amended and supplemented from time to time, together constitute the "Offer") relating to the offer by Ahold Acquisition, Inc., a Delaware corporation (the "Purchaser") and an indirect wholly-owned subsidiary of Koninklijke Ahold N.V. (Royal Ahold), a public company with limited liability incorporated under the laws of The Netherlands with its corporate seat in Zaandam (Municipality Zaanstad), The Netherlands (the "Parent"), to purchase all of the issued and outstanding shares of the $3.52 Cumulative Exchangeable Redeemable Preferred Stock, par value $0.01 per share (the "Shares"), of Supermarkets General Holdings Corporation, a Delaware corporation (the "Company"), at a price of $38.25 per Share, net to the seller in cash, without interest thereon (the "Offer Price"), upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal. Holders of Shares whose certificates evidencing such Shares (the "Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other required documents to Citibank, N.A., as depositary (the "Depositary"), or complete the procedures for book-entry transfer prior to the Expiration Date (as defined in the Offer to Purchase) must tender their Shares according to the guaranteed delivery procedures set forth in Section 3--"Procedures for Tendering Shares" of the Offer to Purchase. We are (or our nominee is) the holder of record of Shares held for your account. A tender of such Shares can be made only by us as the holder of record and pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender Shares held by us for your account. Accordingly, we request instruction as to whether you wish to have us tender on your behalf any or all Shares held by us for your account pursuant to the terms and conditions set forth in the Offer. Please note the following: 1. The tender price is $38.25 per Share, net to the seller in cash, without interest thereon, as set forth in the Introduction to the Offer to Purchase. 2. The Offer is subject to there being validly tendered and not properly withdrawn prior to the Expiration Date (as defined in the Offer to Purchase) a number of Shares which, together with Shares previously acquired by Parent, any direct or indirect subsidiary of Parent (including the Purchaser), the Company or any direct or indirect subsidiary of the Company, represent at least 66 2/3% percent of the Shares issued and outstanding on a fully diluted basis and certain other conditions. See the Introduction and Section 1--"Terms of the Offer" and Section 14-- "Conditions of the Offer" of the Offer to Purchase. 3. The Offer is being made for all of the issued and outstanding Shares. 4. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares by the Purchaser pursuant to the Offer. However, federal income tax backup withholding at a rate of 31% may be required, unless an exemption is available or unless the required tax identification information is provided. See Instruction 9 of the Letter of Transmittal. 5. The Offer and withdrawal rights will expire at 12:00 midnight, New York City time, on Friday, April 9, 1999 unless the Offer is extended. 6. The Board of Directors of the Company (two members of which were elected by the holders of the Shares, voting as a separate class) has unanimously determined that each of the Offer and the subsequent merger of the Company with and into SMG-II Holdings Corporation is fair to, and in the best interests of, the holders of the Shares and unanimously recommends that the holders of the Shares accept the Offer and tender their Shares pursuant to the Offer. 7. Notwithstanding any other provision of the Offer, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (i) certificates evidencing such Shares (the "Share Certificates"), along with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), including any required signature guarantees, or (ii) if such Shares are held in book- entry form, timely confirmation of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company, along with an Agent's Message (as defined in the Offer to Purchase) pursuant to the procedures set forth in Section 3--"Procedures for Tendering Shares" of the Offer to Purchase, and (iii) any other documents required by the Letter of Transmittal. Accordingly, payment may not be made to all tendering stockholders at the same time depending upon when Share Certificates are actually received by the Depositary. If you wish to have us tender any or all of the Shares held by us for your account please so instruct us by completing, executing, detaching and returning to us the instruction form set forth herein. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified below. An envelope to return your instructions to us is enclosed. Your instructions should be forwarded to us in ample time to permit us to submit a tender on your behalf prior to the Expiration Date. The Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statue. If the Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, the Purchaser will make a good faith effort to comply with such state statute or seek to have such statute declared inapplicable to the Offer. If, after such good faith effort, the Purchaser cannot comply with such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by Goldman, Sachs & Co. or one or more registered brokers or dealers licensed under the laws of such jurisdiction. 2 Instructions with Respect to the Offer to Purchase for Cash All of the Outstanding Shares of $3.52 Cumulative Exchangeable Redeemable Preferred Stock of Supermarkets General Holdings Corporation The undersigned acknowledge(s) receipt of your letter, the Offer to Purchase, dated March 15, 1999, and the related Letter of Transmittal (which, as they may be amended and supplemented from time to time, together constitute the "Offer") in connection with the offer by Ahold Acquisition, Inc., a Delaware corporation (the "Purchaser") and an indirect wholly-owned subsidiary of Koninklijke Ahold N.V. (Royal Ahold), a public company with limited liability incorporated under the laws of The Netherlands with its corporate seat in Zaandam (Municipality Zaanstad), The Netherlands (the "Parent"), to purchase all outstanding shares of the $3.52 Cummulative Exchangeable Redeemable Preferred Stock, par value $0.01 per share (the "'Shares"), of Supermarkets General Holdings Corporation, a Delaware corporation. This will instruct you to tender to the Purchaser the number of Shares indicated below (or if no number is indicated below, all Shares) which are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. Number of Shares to be Tendered*: ---------------------------------- Date: ---------------------------------------------------------- SIGN HERE Signature(s): ---------------------------------------------------- Print Name(s): --------------------------------------------------- Print Address(es): ------------------------------------------------ Area Code and Telephone Number(s): -------------------------------- Taxpayer Identification or Social Security Number(s): --------------------- * Unless otherwise indicated, it will be assumed that all of your Shares held by us for your account are to be tendered. 3 EX-99.(A)(5) 6 PRESS RELEASE DATED MARCH 9, 1999 Ahold announces new US Exhibit (a)(5) supermarket acquisition Pathmark Stores to join Ahold Group . Pathmark: 132 supermarkets with estimated 1998 sales of USD 3.7 billion . Acquisition strengthens Ahold position in metro New York . Edwards integration into Pathmark . Ahold pays approx. USD 1.75 billion for full control including assumption of debt . Enhancing to Ahold's earnings per share Zaandam, The Netherlands / Carteret, New Jersey, March 9, 1999 - Royal Ahold, the international food retailer, has agreed to acquire the US supermarket company Pathmark Stores Inc. ("Pathmark"). The company has reached agreement with SMG-II Holdings Corporation ("SMG-II") to acquire all of the outstanding capital stock of SMG-II. This holding company controls Pathmark through its subsidiary Supermarket General Holdings Corporation ("SMGH"). The total price payable by Ahold for all of the capital stock of SMG-II and the preferred stock of SMGH is approximately USD 250 million. Pursuant to the agreement, Ahold will also indirectly assume all of the indebtedness of Pathmark, amounting currently to approximately USD 1.5 billion. In connection with the acquisition, Ahold will make a tender offer for all of the publicly traded preferred shares of SMGH at a price of USD 38.25 per preferred share. The SMGH board of directors has unanimously determined that the tender offer is fair to, and in the best interests of, the preferred shareholders. The acquisition is expected to be non-dilutive to Ahold's earnings per share growth in the first year and enhancing thereafter. Strengthening Ahold's US market position The acquisition of Pathmark, headquartered in Carteret, New Jersey, provides Ahold with a solid market position in densely populated metro New York, including Northern New Jersey, New York City, Long Island and Philadelphia. Pathmark, with estimated 1998 sales of USD 3.7 billion, operates most of its 132 large supermarkets in this trade area. With 25 million people in metro New York. Pathmark has a market share of approximately 12%. It is Ahold's intention to fully integrate its Edwards supermarkets in New Jersey, New York City and Long Island into Pathmark, making it one of the best- positioned food retailers in the area. The chain will operate under the Pathmark banner as a stand-alone Ahold operating company. Local consumer benefits from the acquisition are expected to be significant in the coming years. Ahold plans to upgrade the Pathmark stores into state of the art supermarkets and use its economies of scale and synergy programs to enhance the shopping experience. The acquisition of Pathmark will strengthen Ahold's leadership position in the important markets of metro New York and Philadelphia. This is in addition to Ahold's leading positions in other large cities such as Boston (Stop & Shop), the Washington DC and Baltimore metropolitan areas (Giant-Landover) and Buffalo (Tops). Of the 132 Pathmark stores, 25 are located on Long Island, 18 in New York City, 7 in Westchester/Rockland, 52 in Northern New Jersey, 10 in Southern New Jersey, 16 in Pennsylvania and 4 in Delaware. Features of Pathmark The 132 supermarkets operating under the Pathmark banner have a total selling area of 5.1 million square feet. A Pathmark supermarket has an average selling area of 38,600 square feet and its annual sales per square foot of USD 720 are among the highest in the country. Almost all Pathmark stores are Superstores, offering their customers the convenience of one-stop shopping. A typical Pathmark Superstore features large perishables departments, a meat department with a deli, seafood, health and beauty care and bakery departments, video rentals, a pharmacy and a customer service desk with in store banking facilities. Pathmark is highly regarded in its communities for its well-located stores and broad range of quality food items and general merchandise. As of January 1998, the company employed approximately 28,000 people of whom 20,500 worked on a part time basis. Financial background Pathmark For the three quarters ending October 1998 Pathmark reported sales of USD 2.7 billion and operating earnings of almost USD 97.0 million, resulting in an operating margin of 3.5 % and cash flow of USD 156 million (EBITDA 5.7% of sales). While operationally a well performing food retailer, Pathmark has been highly leveraged requiring it to use extensive cash to make interest payments. Ahold intends to restructure Pathmark's debt so that cash generated can be invested to upgrade the stores and improve the quality of the shopping experience for their customers. The acquisition is subject to review by regulatory agencies. Ahold expects to have the approvals in the second half of 1999 and complete the transaction shortly thereafter. Transaction Completion of the transaction is subject to a number of conditions, including obtaining necessary US regulatory approvals and at least 66 2/3 % of the preferred shares being tendered into the offer. Shareholders of SMG-II, holding a sufficient number of shares to approve the merger, have agreed to vote their shares in favor of the merger. In the event the 66 2/3 % is not tendered, SMG-II has agreed to cause its subsidiary to sell all of the outstanding shares of Pathmark for the same purchase price. Following the tender offer, SMGH will merge with SMG-II, and the remaining preferred shares will be converted into the right to receive USD 38.25 per share in the merger. Acquisition to positively impact on Ahold's earnings per share growth Ahold management anticipates that the integration of Pathmark within Ahold USA will result in USD 30 million of cost savings for the combined organization in its first year. This will increase to USD 50 million in the second year. The acquisition is expected to be non-dilutive to Ahold's earnings per share growth in the first full calendar year and enhancing thereafter. Funding of Pathmark acquisition Ahold intends to fund the purchase of all of the SMG-II common stock and the SMGH preferred stock (USD 250 million) by drawing on existing committed long- term credit facilities. Once Ahold has taken control of Pathmark it plans to immediately redeem all existing outstanding debt obligations. Part of the debt restructuring may be funded with newly issued equity capital. Ahold in the United States In the United States Ahold is the leading supermarket operator along the eastern seaboard with over 1,000 stores. Ahold currently owns five companies: Stop & Shop with stores in Connecticut and Massachusetts; Giant-Landover in the Washington DC and Baltimore metropolitan areas, Giant-Carlisle including the Edwards division in Pennsylvania; Tops Markets in western New York State and BI- LO in the Carolinas. The Ahold USA companies generated 1998 sales of USD 16.2 billion with operating results of USD 714 million. Ahold employs approximately 130,000 people in the US. The supermarkets have an excellent name with their customers and are recognized for superior value for money and service. The company is making substantial progress in developing synergies among its US chains benefiting its customers. Private label products are purchased jointly and IT systems, distribution, construction and administrative processes are being integrated. Pathmark customers will benefit from the economies of scale Ahold generates in the US, once the acquisition is completed. Ahold in the world In addition to the United States Ahold also operates prominent supermarket chains and hypermarkets in The Netherlands and other European countries including Portugal, Spain, the Czech Republic and Poland. Ahold also has operations in Latin America and the Asia Pacific region. The company operates more than 3,600 supermarkets, hypermarkets and specialty stores worldwide with 1998 sales of over USD 30 billion. Ahold employs over 280,000 people in 17 countries and serves 25 million customers every week. Comments by Bob Tobin, President & CEO Ahold USA 'The acquisition of Pathmark provides Ahold with a large number of high quality locations in an attractive market where our position left room for improvement. This is now going to change. We are delighted to be able to service many new customers under the Pathmark banner. We have various positive contributions in mind and expect considerable synergies from the integration with our sister operations. We have already gained quite a lot of experience in generating synergies following our other successful acquisitions. We have shown this recently after the fourth quarter 1998 acquisition of Giant-Landover and earlier in 1996 with Ahold's acquisition of Stop & Shop. In particular, the exchange of best practices, the restructuring of the Pathmark balance sheet and the integration of certain administrative functions will positively impact on cost and benefit the bottom line significantly. We also see important advantages for local Pathmark customers as we offer them the upgrading of their favorite stores and the continuity of shopping in a well-stocked supermarket where they can count on quality service. That's what Ahold stands for. We are very excited about this acquisition.' Comments by James Donald, CEO of Pathmark 'The acquisition of Pathmark by Ahold is excellent news for us, our customers and associates. In the last two years we have made significant progress improving our operations to which customer reaction has been most positive. However to stay maximum competitive and grow the business in the future, our company is much better positioned by teaming up with Ahold and becoming part of a much larger group, than trying to do it independently. Ahold is known for its customer focus and how it succeeds in satisfying their needs. We are excited about the opportunity to benefit from Ahold's economies of scale and synergy benefits to step up our services in the local communities and improve the company's results. As an Ahold company we will be optimally positioned to realize our considerable potential and grow much faster. We're ready for it and so are our customers.' For more information: Ahold Public Relations: +31 75 659 5720 After office hours: Hans Gobes, Senior VP Corporate Communications: +31 6 5582 2298 Jan Hol, VP Public Relations: +31 6 2293 3137 This press release contains "forward-looking statements" within the meaning of U.S. federal securities laws. The company's performance is subject to risks, uncertainties and other factors that could cause actual results to differ materially from these statements. Such risks include, but are not limited to, general economic conditions and changes in interest rates in the countries in which the Company operates, increases in competition, and fluctuations in exchange rates between the Guilder and the other currencies in which the Company's assets, liabilities and results are denominated, in particular, the U.S. dollar. Many of these factors are beyond the Company's ability to control or predict. For a more detailed discussion of such risks and other factors, see Royal Ahold's Annual Report on Form 20-F for its fiscal year ended December 29, 1997. EX-99.(A)(6) 7 FORM OF NEWSPAPER AD. DATED MARCH 15, 1999 Exhibit (a)(6) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares Customer Service Financial Printing Group This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares. The Offer is made solely by the Offer to Purchase dated March 15, 1999 and the related Letter of Transmittal and is being made to all holders of Shares. Purchaser is not aware of any state where the making of the Offer is prohibited by any applicable law. If Purchaser becomes aware of any jurisdiction where the making of the Offer or the acceptance of Shares is not in compliance with any applicable law, Purchaser will make a good faith effort to comply with such law. If, after such good faith effort, Purchaser cannot comply with such law, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Ahold Acquisition, Inc. by Goldman, Sachs & Co. or one or more registered brokers or dealers licensed under the laws of such jurisdiction. Notice of Offer to Purchase for Cash All of the Outstanding Shares of $3.52 Cumulative Exchangeable Redeemable Preferred Stock of Supermarkets General Holdings Corporation at $38.25 Net Per Share by Ahold Acquisition, Inc. An Indirect Wholly-Owned Subsidiary of Koninklijke Ahold N.V. (Royal Ahold) Ahold Acquisition, Inc. ("Purchaser"), a Delaware corporation and an indirect wholly-owned subsidiary of Koninklijke Ahold N.V. (also known as Royal Ahold) ("Parent"), a corporation organized under the laws of The Netherlands, is offering to purchase all issued and out-standing shares of the $3.52 Cumulative Exchangeable Redeemable Preferred Stock, par value $0.01 per share (the "Shares"), of Supermarkets General Holdings Corporation, a Delaware corporation (the "Company"), at a price of $38.25 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated March 15, 1999 and in the related Letter of Transmittal (which, as they may be amended and supplemented from time to time, together constitute the "Offer"). THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, APRIL 9, 1999 UNLESS THE OFFER IS EXTENDED. The Offer is conditioned upon, among other things, (i) there being validly tendered and not properly withdrawn prior to the expiration of the Offer a number of Shares which, together with Shares previously acquired by Parent, any direct or indirect subsidiary of Parent (including Purchaser), the Company or any direct or indirect subsidiary of the Company, represent at least 66-2/3% of all of the issued and outstanding Shares on a fully diluted basis (the "Minimum Condition"), (ii) the expiration or termination of any applicable waiting period under antitrust laws described in Section 15 of the Offer to Purchase and (iii) the satisfaction of certain other terms and conditions referred to in Section 14 of the Offer to Purchase. The Offer is an integral part of the transactions contemplated by, and is being made pursuant to, an Agreement and Plan of Merger, dated as of March 9, 1999 (the "SMG-II Merger Agreement"), by and among Parent, Purchaser and SMG-II Holdings Corporation ("SMG-II"), a Delaware corporation. SMG-II owns all of the issued and outstanding shares of the capital stock of the Company other than the Shares and, through the Company and PTK Holdings, Inc. ("PTK"), all of the issued and outstanding shares of the capital stock (the "Pathmark Stock") of Pathmark Stores, Inc. Pursuant to the SMG-II Merger Agreement, Parent will be acquiring all of the issued and outstanding shares of the capital stock of SMG- II through a merger of the Purchaser with and into SMG-II (the "SMG-II Merger"). Holders of 84% of all of the issued and outstanding shares of the capital stock of SMG-II have agreed to vote in favor of the SMG-II Merger. In the event that the Minimum Condition is not met, the Offer will expire without any of the Shares being purchased hereunder and Purchaser will instead acquire the Pathmark Stock from PTK for a purchase price of $242,800,000. In such event, the only material asset of the Company would be the ownership of all of the issued and outstanding shares of the capital stock of PTK, the only material asset of which in turn would be the net after tax proceeds from the sale of the Pathmark Stock to Purchaser. Following the consummation of the SMG-II Merger, the Company will be merged with and into SMG-II (the "Company Merger"). At the effective time of the Company Merger, each outstanding Share (other than Shares held by any subsidiary of the Company or in the treasury of the Company, or by Parent or any subsidiary of Parent (including the Shares acquired by Purchaser pursuant to the Offer), which Shares will be canceled, and other Shares, if any, held by stockholders who perfect their appraisal rights under Delaware Law) will be converted into the right to receive $38.25 in cash, without interest. The Board of Directors of the Company (two members of which were elected by the holders of the Shares, voting as a separate class) has unanimously determined that each of the Offer and the Company Merger is fair to, and in the best interests of, the holders of the Shares and unanimously recommends that the holders of the Shares accept the Offer and tender their Shares pursuant to the Offer. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares pursuant to the Offer. For purposes of the Offer, Purchaser will be deemed to have accepted for payment (and thereby purchased) Shares validly tendered and not properly withdrawn if, as and when Purchaser gives oral or written notice to the depositary named below (the "Depositary") of its acceptance for payment of such Shares. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders, for the purpose of receiving payments from Purchaser and transmitting payments to such tendering stockholders whose Shares have been accepted for payment. In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (i) in the case of certificates evidencing such Shares, such certificates, along with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), including required signature guarantees, (ii) in the case of Shares held in book-entry form, timely confirmation of a book-entry transfer of such Shares into the account of the Depositary at the Book-Entry Transfer Facility, along with an Agent's Message, as defined in Section 2 of the Offer to Purchase, and (iii) all other documents required by the Letter of Transmittal. Under no circumstances will interest be paid on the purchase price for the tendered Shares, regardless of any delay in making such payment or extension of the Expiration Date. The term "Expiration Date" shall mean 12:00 midnight, New York City time, on Friday, April 9, 1999, unless and until Purchaser, in accordance with the terms of the Offer, shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire. Subject to the applicable rules and regulations of the Securities and Exchange Commission (the "Commission") and applicable law, Purchaser expressly reserves the right, in its sole discretion, at any time or from time to time, to extend for any reason the period of time during which the Offer is open, including upon the occurrence of any of the events specified in Section 14 of the Offer to Purchase, by giving oral or written notice of such extension to the Depositary and by making a public announcement thereof. Subject to the applicable rules and regulations of the Commission and to applicable law, Purchaser also expressly reserves the right, in its sole discretion at any time and from time to time: (i) to delay acceptance for payment of, or, regardless of whether such Shares were theretofore accepted for payment, payment for, any Shares pending receipt of any regulatory approval specified in Section 15 of the Offer to Purchase or in order to comply in whole or in part with any other applicable law; (ii) to terminate the Offer and not accept for payment any Shares if any of the conditions referred to in Section 14 of the Offer to Purchase are not satisfied or any of the events specified in Section 14 of the Offer to Purchase have occurred; and (iii) subject to the terms of the SMG-II Merger Agreement, to waive any condition, or otherwise amend the Offer in any respect, in each case by giving oral or written notice of such delay, termination, waiver or amendment to the Depositary and by making a public announcement thereof. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the right of a tendering stockholder to withdraw such stockholder's Shares. Any such extension, delay, termination, waiver or amendment will be followed, as promptly as practicable, by a public announcement thereof by no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Subject to applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which require that material changes be promptly disseminated to stockholders in a manner reasonably designed to inform them of such changes and without limiting the manner in which Purchaser may choose to make any public announcement, Purchaser will have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a press release to the Dow Jones News Service or as otherwise may be required by applicable law. Except as otherwise provided below, tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn at any time after May 13, 1999, or at such later time as may apply if the Offer is extended. For a withdrawal to be effective notice of withdrawal must be timely received by the Depositary at one of its addresses set forth below. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn, and the name of the registered holder of the Shares, if different from that of the person who tendered such Shares. If certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the tendering stockholders must submit to the Depositary the serial numbers shown on the particular certificate evidencing the Shares to be withdrawn and, unless the Shares evidenced by such certificates have been tendered by an Eligible Institution (as defined in Section 3 of the Offer to Purchase) the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry transfer set forth in Section 3 of the Offer to Purchase, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares and must otherwise comply with the Book-Entry Transfer Facility's procedures. Withdrawals of tendered Shares may not be rescinded (without Purchaser's consent), and any Shares properly withdrawn will there-after be deemed not validly tendered for purposes of the Offer. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by Purchaser, in its sole discretion, which determination will be final and binding. None of Parent, Purchaser, the Depositary, the Information Agent, the Dealer Managers or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Shares properly withdrawn may be retendered at any time prior to the Expiration Date by following any of the procedures described in Section 3 of the Offer to Purchase. The Company has provided Purchaser with the Company's list of holders of the Shares and security position listings in respect of the Shares for the purpose of disseminating the Offer to the holders of Shares. The Offer to Purchase, the Letter of Transmittal and any other relevant materials will be mailed to record holders of Shares whose names appear on the Company's list of holders of the Shares and will be furnished, for subsequent transmittal to beneficial owners of Shares, to brokers, dealers, commercial banks, trust companies and similar persons whose names or the names of whose nominees, appear on the Company's list of holders of the Shares, or if applicable, who are listed as participants in a clearing agency's security position listing. The information required to be disclosed by paragraph (e)(1)(vii) of Rule 14d-6 under the Exchange Act is contained in the Offer to Purchase and is incorporated herein by reference. The Offer to Purchase and the related Letter of Transmittal contain important information that should be read carefully before any decision is made with respect to the Offer. Requests for copies of the Offer to Purchase, the related Letter of Transmittal and other tender offer materials may be directed to the Information Agent as set forth below, and copies will be furnished promptly at Purchaser's expense. Questions or requests for assistance may be directed to the Information Agent or the Dealer Managers as set forth below. The Information Agent for the Offer is: MORROW & CO., INC. 445 Park Avenue, 5th Floor New York, New York 10022 Toll Free (800) 566-9061 Call Collect (212) 754-8000 Banks and Brokerage Firms Please Call: (800) 662-5200 The Depositary for the Offer is: Citibank, N.A. By Hand: Citibank, N.A. Corporate Actions Suite 4660 P.O. Box 2544 Jersey City, New Jersey 07303-2544 For Information: (877) 248-4257 By Mail: CItibank N.A. Corporate Actions 111 Wall Street, 5th Floor Window New York, New York 10043 By Overnight Courier: Citibank, N.A. Corporate Actions 111 Wall Street, 5th Floor Window New York, New York 10043 The Dealer Managers for the Offer are: Goldman, Sachs & Co. 85 Broad Street New York, New York 10004 Call Collect (212) 357-6380 Toll Free: (877) 686-5059 March 15, 1999 EX-99.(A)(7) 8 NOTICE OF GUARANTEED DELIVERY Exhibit (a)(7) THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action to be taken, you should seek your own financial advice immediately from your own appropriately authorized independent financial advisor. If you have sold or transferred all of your registered holding of Shares (as defined below), please forward this document and all accompanying documents to the stockbroker, bank or other agent through whom the sale or transfer was effected, for transmission to the purchaser or transferee. NOTICE OF GUARANTEED DELIVERY For Tender of Shares of $3.52 Cumulative Exchangeable Redeemable Preferred Stock (Not to be used for Signature Guarantees) of Supermarkets General Holdings Corporation Pursuant to the Offer to Purchase dated March 15, 1999 by Ahold Acquisition, Inc. An Indirect Wholly-Owned Subsidiary of Koninklijke Ahold N.V. (Royal Ahold) As set forth under Section 3--"Procedures for Tendering Shares" in the Offer to Purchase dated March 15, 1999 and any supplements or amendments thereto (the "Offer to Purchase"), this form or one substantially equivalent hereto must be used to accept the Offer if (i) certificates ("Share Certificates") representing shares of $3.52 Cumulative Exchangeable Redeemable Preferred Stock, par value $0.01 per share ("Shares"), of Supermarkets General Holdings Corporation, a Delaware corporation (the "Company"), are not immediately available, (ii) if the procedures for book-entry transfer cannot be completed on a timely basis, or (iii) time will not permit Share Certificates and all other required documents to reach Citibank, N.A. (the "Depositary") prior to the Expiration Date (as defined in Section 1--"Terms of the Offer" of the Offer to Purchase). This Notice of Guaranteed Delivery may be delivered by hand or mail to the Depositary and must include a signature guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery. See the Guaranteed Delivery Procedures described in the Offer to Purchase under Section 3--"Procedures for Tendering Shares". Certain terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Offer to Purchase. The Depositary for the Offer is: Citibank, N.A.
By Hand: By Mail: By Overnight Carrier: Citibank, N.A. Citibank, N.A. Citibank, N.A. Corporate Actions Corporate Actions Corporate Actions 111 Wall Street, 5th Floor Window Suite 4660 111 Wall Street, 5th Floor Window New York, New York 10043 P.O. Box 2544 New York, New York 10043 Jersey City, New Jersey 07303-2544
For Information: (877) 248-4237 Delivery of this Notice of Guaranteed Delivery to an address other than as set forth above does not constitute a valid delivery. This Notice of Guaranteed Delivery is not to be used to guarantee a signature. If a signature on a Letter of Transmittal is required to be guaranteed by an Eligible Institution under the instruction thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. See Signature Guarantee in Section 3--"Procedures for Tendering Shares" of the Offer to Purchase. 2 Ladies and Gentlemen: The undersigned hereby tenders to Ahold Acquisition, Inc., a Delaware corporation and an indirect wholly-owned subsidiary of Koninklijke Ahold N.V. (Royal Ahold), a public company with limited liability incorporated under the laws of The Netherlands with its corporate seat in Zaandam (Municipality Zaanstad), The Netherlands, under the terms and subject to the conditions set forth in the Offer to Purchase and the related Letter of Transmittal, receipt of each of which is hereby acknowledged, the number of Shares indicated below pursuant to the Guaranteed Delivery Procedures described in the Offer to Purchase under Section 3--"Procedures for Tendering Shares". Number of Shares: ______________________________ Name of Record Holder(s) _______________________ Certificate No.(s) (if available): _____________ ________________________________________________ ________________________________________________ ________________________________________________ Address: _______________________________________ ________________________________________________ Area Code and Tel. No.: ________________________ Signature(s): __________________________________ Dated: _________________________________________
THE GUARANTEE BELOW MUST BE COMPLETED GUARANTEE (Not to be used for signature guarantee) The undersigned, an Eligible Institution (as defined in the Offer to Purchase), hereby guarantees that the undersigned will deliver to the Depositary, at one of its addresses set forth above, the Share Certificates representing the Shares tendered hereby, in proper form for transfer, together with a properly completed and duly executed Letter of Transmittal or with any required signature guarantees and any other required documents, all within three New York Stock Exchange trading days after the date hereof. Name of Firm, Agent or Trustee: ________________ ________________________________________________ (Authorized Signature) ________________________________________________ Name: __________________________________________ (Please type or print) Address: _______________________________________ Title: _________________________________________ (Zip Code) ________________________________________________ Dated: _________________________________________ Area code and Tel. No.: ________________________
Note: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE OF GUARANTEED DELIVERY; SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 3 EX-99.(A)(8) 9 GUIDELINES FOR SUBSTITUTE FORM W-9 Exhibit (a)(8) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 Guidelines for Determining the Proper Identification Number to Give the Payer--Social Security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the Payer. - --------------------------------------- ---------------------------------------
For this type of Give the account: SOCIAL SECURITY number of-- - ----------------------------------------------- 1. An individual's The individual account 2. Two or more The actual owner of the individuals (joint account or, if combined account) funds, the first individual on the account(1) 3. Husband and wife The actual owner of the (joint account) account or, if joint funds, the first individual on the account(1) 4. Custodian account The minor(2) of a minor (Uniform Gift to Minors Act) 5. Adult and minor The adult, or if the (joint account) minor is the only contributor, the minor(1) 6. Account in the name The ward, minor or of guardian or incompetent person(3) committee for a designated ward, minor or incompetent person 7. a. A revocable The grantor-trustee(1) savings trust account (in which grantor is also trustee) b. Any "trust" The actual owner(4) account that is not a legal or valid trust under State law
Give the EMPLOYER For this type of account: IDENTIFICATION number of-- ------------------------------------- 8. Sole proprietorship The owner(4) account 9. A valid trust, estate The legal entity (Do or pension trust not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate account The corporation 11. Religious, charitable The organization or educational organization account 12. Partnership account The partnership held in the name of the business 13. Association, club or The organization other tax-exempt organization 14. A broker or registered The broker or nominee nominee 15. Account with the The public entity Department of Agriculture in the name of a public entity (such as a State or local governmental school district or prison) that receives agricultural program payments
- --------------------------------------- --------------------------------------- (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 Page 2 Obtaining a Number If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Card, or Form SS- 4, Application for Employer Identification Number (for businesses and all other entities), or Form W-7 for Individual Taxpayer Identification Number (for alien individuals required to file U.S. tax returns), at an office of the Social Security Administration or the Internal Revenue Service. Payees Exempt from Backup Withholding Payees specifically exempted from backup withholding on all payments include the following: . A corporation. . A financial institution. . An organization exempt from tax under section 501(a), or an individual retirement plan, or a custodial account under Section 403(b)(7). . The United States or any agency or instrumentality thereof. . A State, the District of Columbia, a possession of the United States, or any political subdivision or instrumentality thereof. . A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. . An international organization or any agency or instrumentality thereof. . A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. . A real estate investment trust. . A common trust fund operated by a bank under section 584(a). . An entity registered at all times during the tax year under the Investment Company Act of 1940. . A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: . Payments to nonresident aliens subject to withholding under section 1441. . Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. . Payments of patronage dividends where the amount received is not paid in money. . Payments made by certain foreign organizations. . Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: . Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. . Payments of tax-exempt interest (including exempt-interest dividends under section 852). . Payments described in section 6049(b)(5) to nonresident aliens. . Payments on tax-free covenant bonds under section 1451. . Payments made by certain foreign organizations. . Payments made to a nominee. Exempt payees described above should file a Substitute Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends and patronage dividends that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A. Privacy Act Notice.--Section 6109 requires most recipients of dividend, interest or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. Penalties (1) Penalty for Failure to Furnish Taxpayer Identification Number.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) Civil Penalty for False Information With Respect to Withholding.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) Criminal Penalty for Falsifying Information.--Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.(B)(1) 10 AMENDED AND RESTATED FACILITY AGMT. 12/18/96 EXHIBIT (b)(1) DATED SEPTEMBER 7, 1998 between KONINKLIJKE AHOLD N.V. AHOLD U.S.A., INC. (formerly AHOLD USA HOLDINGS, INC.) as Borrowers and Guarantors and THE CHASE MANHATTAN BANK as Facility Agent ---------------------------------------- AMENDMENT AND RESTATEMENT AGREEMENT relating to a Multicurrency Revolving Credit Agreement dated 18 December 1996 ---------------------------------------- Clifford Chance Amsterdam THIS AMENDMENT AND RESTATEMENT AGREEMENT is made the 7th day of September 1998 BETWEEN (1) KONINKLIJKE AHOLD N.V. (the "Principal Company"); (2) AHOLD U.S.A., INC. (formerly AHOLD USA HOLDINGS, INC.) ("Ahold USA" and, together with the Principal Company, the "Borrowers"); and (3) THE CHASE MANHATTAN BANK (the "Facility Agent"). NOW IT IS AGREED as follows: WHEREAS: (A) By an agreement dated 18 December, 1996 (the "Existing Facility Agreement") made between (i) the Principal Company as borrower and guarantor, (ii) Ahold USA as borrower and guarantor, (iii) ABN AMRO Bank N.V., Chase Investment Bank Limited and J.P. Morgan Securities Ltd. as arrangers, (iv) the Facility Agent as facility, swing-line, letter of credit agent and short term advances agent, (v) Chase Manhattan International limited as multicurrency facility agent and (vi) the financial institutions named therein as Banks, the Banks made available to the Borrowers a US$1,000,000,000 multicurrency revolving credit facility with short-term advance, swing-line and letter of credit options on the terms and conditions set out therein. (B) It has been agreed between the parties hereto (in connection with which the Facility Agent is acting on behalf of, and with the express consent of, itself, the Arrangers and the Banks) that the Existing Facility Agreement shall be amended and restated as hereinafter provided, subject to the terms and conditions hereof. NOW IT IS HEREBY AGREED as follows: 1. Interpretation 1.1 Terms defined in the Existing Facility Agreement shall, unless otherwise defined herein and save as the context otherwise requires, have the same meanings when used in this Agreement. 1.2 In this Agreement the "Effective Date" means the later of the date hereof and the date upon which the Facility Agent confirms in writing to the Banks and the Principal Company that it has received each of the documents listed in the Schedule in form and substance satisfactory to the Facility Agent. 1.3 Clause and Schedule headings are for ease of reference only. 1.4 Words and expressions used herein importing the singular shall, where the context permits or requires, include the plural and vice versa. 2. Amendments to the Existing Facility Agreement The parties hereto agree that the Existing Facility Agreement shall, as of the Effective Date, be amended and restated for all purposes as set out in the Annex to this Agreement and agree to be bound by the terms and conditions thereof accordingly. 3. Representations Each of the Borrowers and the Guarantors: (a) repeats each of the representations and warranties set out in paragraphs (i), (ii), (iii), (viii) and (x) of Clause 23 (Representations and Warranties) of the Existing Facility Agreement on the date hereof and on the Effective Date (by reference to the facts and circumstances then subsisting) as if each reference therein to the "Finance Documents" included a reference to this Agreement and the Existing Facility Agreement (as amended hereby, when such representations and warranties are repeated on the Effective Date) and acknowledges that the Facility Agent has entered into this Agreement in reliance on those representations and warranties; and (b) confirms on the date hereof and on the Effective Date that no Event of Default or Potential Event of Default has occurred. 4. Waiver The Facility Agent hereby waives any default under the Existing Facility Agreement which may have occurred as a result of any breach of any representation contained in paragraph (xix) of Clause 23 of the Existing Facility Agreement by virtue of (a) any Margin Stock being owned by any Member of the Group or (b) the proceeds of any borrowings under the Existing Facility Agreement being used, directly or indirectly, for any purposes specified in such paragraph (xix). 5. Miscellaneous 5.1 Clauses 33 (Costs and Expenses), 37 (Remedies and Waivers, Partial Invalidity), 39 (Notices) and 40.2 (English Courts) to Clause 40.9 (Waiver of Immunity) of the Existing Facility Agreement shall be deemed to be incorporated herein as though set out herein, mutatis mutandis. 5.2 The Existing Facility Agreement shall remain in full force and effect save as expressly amended hereby and the parties hereto agree that: (a) this Agreement shall be a "Finance Document" for the purposes of the Existing Facility Agreement and the other Finance Documents; and -2- (b) on and after the Effective Date any reference to the Existing Facility Agreement in any of the Finance Documents (including the Existing Facility Agreement) shall be construed as a reference to the Existing Facility Agreement as amended hereby. 5.3 For the avoidance of doubt the guarantees and other obligations given and entered into by the Guarantors pursuant to Clause 26 of the Existing Facility Agreement shall not be affected by the amendments to the Existing Facility Agreement effected hereby on the Effective Date or by any of the other matters provided for in this Agreement (including the waiver in Clause 4 of this Agreement)(and shall continue in full force and effect in accordance with the terms of the Existing Facility Agreement notwithstanding such amendments or such other matters). 6. Counterparts This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which, when so executed, shall be an original but all such counterparts shall together constitute but one and the same instrument. 7. Law This Agreement shall be governed by, and construed in accordance with, the laws of The Netherlands. IN WITNESS whereof this Agreement has been entered into the day and year first above written. -3- THE SCHEDULE Conditions Precedent Documents 1. In relation to each of the Obligors: (a) a copy, certified a true copy by a duly authorised officer of such Obligor, of the constitutional documents of such Obligor and (in the case of the Principal Company) an extract from the relevant Chamber of Commerce; (b) a copy, certified a true copy by a duly authorised officer of such Obligor, of a board resolution of such Obligor and (in the case of the Principal Company) such resolutions of the board of managing directors of the Principal Company, the supervisory board of the Principal Company (Raad van Commissarissen) and the works' council of the Principal Company (Ondernemingsraad) as may be required by Dutch Counsel to the Banks approving the execution, delivery and performance of this Agreement and the terms and conditions hereof and authorising a named person or persons to sign this Agreement and any documents to be delivered by such Obligor pursuant hereto; and (c) a certificate of a duly authorised officer of such Obligor setting out the names and signatures of the persons authorised to sign, on behalf of such Obligor, this Agreement and any documents to be delivered by such Obligor pursuant hereto. 2. A copy, certified a true copy by or on behalf of the Principal Company, of each such law, decree, consent, licence, approval, registration or declaration as is, in the opinion of counsel to the Banks, necessary to render this Agreement legal, valid, binding and enforceable, to make this Agreement admissible in evidence in each Obligor's jurisdiction of incorporation and to enable each of the Obligors to perform its obligations hereunder. 3. An opinion of each of the Borrowers' in-house Dutch and United States counsel in substantially the form agreed by the Facility Agent prior to the execution hereof. 4. An opinion of Clifford Chance, solicitors to the Facility Agent, in substantially the form agreed by the Facility Agent prior to the execution hereof. The Obligors KONINKLIJKE AHOLD N.V. By: Address: Albert Heijnweg 1 1507 EH Zaandam The Netherlands -4- Attention: The Treasury Telephone: 31 75 659 5635 Fax: 31 75 695 8359 AHOLD U.S.A., INC. By: Address: One Atlanta Plaza, Suite 2575 950 East Paces Ferry Road 30326 Atlanta, Georgia United States of America Attention: Ernie J. Smith Telephone: 1 404 262 6050 Fax: 1 404 262 6051 The Facility Agent THE CHASE MANHATTAN BANK By: Address: 270 Park Avenue New York, NY 10081 United States of America Attention: Hilma Gabbidon Telephone: 1 212 552 4650 Telefax: 1 212 552 5658 -5- ANNEX US$1,000,000,000 MULTICURRENCY REVOLVING CREDIT AGREEMENT with SHORT-TERM ADVANCE, SWING-LINE AND LETTER OF CREDIT OPTIONS between KONINKLIJKE AHOLD N.V. AHOLD USA HOLDINGS, INC. as Borrowers and Guarantors ABN AMRO BANK N.V. CHASE INVESTMENT BANK LIMITED J.P. MORGAN SECURITIES LTD. as Arrangers THE CHASE MANHATTAN BANK as Facility, Swing-Line, Letter of Credit and Short-Term Advances Agent CHASE MANHATTAN INTERNATIONAL LIMITED as Multicurrency Facility Agent and OTHERS Clifford Chance Amsterdam TABLE OF CONTENTS
Page PART 1 DEFINITIONS AND INTERPRETATION....................................................................................1 1. Definitions and Interpretation...............................................................................1 PART 2 THE FACILITIES; ADDITIONAL BORROWERS.............................................................................15 2. The Facilities..............................................................................................15 PART 3 UTILISATION OF THE REVOLVING CREDIT FACILITY.....................................................................17 3. Utilisation of the Revolving Credit Facility................................................................17 PART 4 UTILISATION OF THE LETTER OF CREDIT FACILITY.....................................................................20 4. Utilisation of the Letter of Credit Facility................................................................20 5. Indemnity...................................................................................................22 6. Letter of Credit Fees and Fronting Fee......................................................................23 PART 5 UTILISATION OF THE SWING-LINE FACILITY...........................................................................24 7. Utilisation of the Swing-Line Facility......................................................................24 PART 6 UTILISATIONS OF THE SHORT-TERM ADVANCES FACILITY.................................................................26 8. Request for offers..........................................................................................26 9. Offers for Short-Term Advances..............................................................................27 10. Offers by the Short-Term Advances Agent or its Affiliates...................................................27 11. Acceptance of Offers........................................................................................28 12. Making of Short-Term Advances...............................................................................28 PART 7 INTEREST.........................................................................................................30 13. Interest on Revolving Credit Advances.......................................................................30 14. Interest on Swing-Line Advances.............................................................................30 15. Interest on Short-Term Advances.............................................................................30
(i)
Page PART 8 REPAYMENT AND CANCELLATION.......................................................................................31 16. Repayment of Advances.......................................................................................31 17. Cancellation................................................................................................31 PART 9 RISK ALLOCATION..................................................................................................32 18. Taxes.......................................................................................................32 19. Tax Receipts................................................................................................32 20. Increased Costs.............................................................................................33 21. Mitigation..................................................................................................34 22. Market Disruption...........................................................................................35 PART 10 REPRESENTATIONS, WARRANTIES, UNDERTAKINGS AND EVENTS OF DEFAULT..................................................36 23. Representations and Warranties..............................................................................36 24. Undertakings................................................................................................39 25. Events of Default...........................................................................................42 PART 11 GUARANTEE........................................................................................................45 26. Guarantee and Indemnity.....................................................................................45 PART 12 DEFAULT INTEREST AND INDEMNITY...................................................................................48 27. Default Interest and Indemnity..............................................................................48 PART 13 PAYMENTS.........................................................................................................50 28. Currency of Account and Payment.............................................................................50 29. Payments....................................................................................................50 30. Setoff......................................................................................................52 31. Sharing.....................................................................................................52 PART 14 FEES, COSTS AND EXPENSES.........................................................................................54 32. Fees........................................................................................................54 33. Costs and Expenses..........................................................................................54 PART 15 AGENCY PROVISIONS................................................................................................56 34. The Agents, the Arrangers and the Banks.....................................................................56
(ii)
Page PART 16 ASSIGNMENTS AND TRANSFERS........................................................................................60 35. Assignments and Transfers...................................................................................60 PART 17 MISCELLANEOUS....................................................................................................62 36. Calculations and Evidence of Debt...........................................................................62 37. Remedies and Waivers, Partial Invalidity....................................................................62 38. Amendments..................................................................................................63 39. Notices.....................................................................................................64 PART 18 LAW AND JURISDICTION.............................................................................................66 40. Law and Jurisdiction........................................................................................66
THE SCHEDULES The First Schedule : The Banks The Second Schedule : Form of Transfer Certificate The Third Schedule : Condition Precedent Documents The Fourth Schedule : Utilisation Request The Fifth Schedule : Material Subsidiaries The Sixth Schedule : Existing Letters of Credit The Seventh Schedule : Opinion of Borrowers' Netherlands and United States Counsel The Eighth Schedule : Supplemental Agreement (iii) THIS AGREEMENT is made on 18 December 1996 BETWEEN: (1) KONINKLIJKE AHOLD N.V. as borrower and guarantor (the "Principal Company"); (2) AHOLD USA HOLDINGS, INC. as borrower and guarantor ("Ahold USA" and, together with the Principal Company, the "Borrowers"); (3) ABN AMRO BANK N.V., CHASE INVESTMENT BANK LIMITED and J.P. MORGAN SECURITIES LTD. as arrangers (the "Arrangers"); (4) THE CHASE MANHATTAN BANK as facility agent (the "Facility Agent"), as swing-line agent (the "Swing-Line Agent"), as Letter of Credit agent (the "Letter of Credit Agent") and as short term advances agent (the "Short-Term Advances Agent"); (5) CHASE MANHATTAN INTERNATIONAL LIMITED as Multicurrency Facility Agent (the "Multicurrency Facility Agent"); and (6) THE BANKS (as defined below). IT IS AGREED as follows: PART 1 DEFINITIONS AND INTERPRETATION 1. Definitions and Interpretation 1.1 Definitions In this Agreement: "Absolute Basis" in relation to Short-Term Advances means the basis of any offer therefor expressed as a percentage rate and not by reference to LIBOR. "Adjustment Amounts" means, in relation to any proposed Advance or Letter of Credit: (a) the Dollar Amounts of any other proposed Advances or Letters of Credit which any of the Banks or the Issuing Bank are then obliged to make, issue or participate in on or before the proposed Utilisation Date relating to such proposed Advance or Letter of Credit; and (b) the Dollar Amounts of any Advances or Letters of Credit which have been made, issued or participated in by any of the Banks or the Issuing Bank pursuant hereto and which are due to be repaid or, as the case may be, expire on or before the proposed Utilisation Date relating to such proposed Advance or Letter of Credit. "Advance" means a Revolving Credit Advance, a Swing-Line Advance or a Short-Term Advance. "Additional Borrower" means a wholly-owned direct or indirect subsidiary of the Principal Company which, with the prior written consent of the Facility Agent acting on the instructions of the Banks, has become an Additional Borrower pursuant to and in accordance with the provisions of Clause 2.9 to Clause 2.12. "Agents" means the Facility Agent, the Swing-Line Agent, the Letter of Credit Agent, the Short-Term Advance Agent and the Multicurrency Facility Agent. "Available Commitment" means, in relation to a Bank at any time and save as otherwise provided herein, its Commitment at such time less its share of the Outstandings at such time Provided that such amount shall not be less than zero. "Available Facility" means, at any time, the aggregate of the Available Commitments at such time and adjusted so as to take into account: (a) any Adjustment Amounts; and (b) any reduction in the Commitment of a Bank which will occur prior to the commencement of the Term relating to the relevant Advance or the relevant Letter of Credit consequent upon a cancellation of the whole or any part of the relevant Commitment of such Bank pursuant to the terms hereof; "Available Letter of Credit Commitment" means, in relation to a Bank at any time and save as otherwise provided herein, the lesser of: (a) its Letter of Credit Commitment at such time less its share of the Dollar Amounts of the outstanding Letters of Credit at such time (and for the purposes of this definition an "outstanding" Existing Letter of Credit shall mean an Existing Letter of Credit in which the Banks are participating in accordance with Clause 4); and (b) its Available Commitment at such time. "Available Letter of Credit Facility" means, at any time, the aggregate of the Available Letter of Credit Commitments at such time and, for the purposes of Clause 4.2(c) and Clause 4.3(a) and a proposed Letter of Credit only, adjusted so as to take into account: (a) any Adjustment Amounts; and (b) any reduction in the Commitment or Letter of Credit Commitment of a Bank which will occur prior to the commencement of the Term relating to such proposed Letter of Credit consequent upon a cancellation of the whole or any part of the Commitment of such Bank pursuant to the terms hereof. "Available Swing-Line Commitment" means, in relation to a Swing-Line Bank at any time and save as otherwise provided herein, the lesser of: (a) its Swing-Line Commitment at such time less its share of the Dollar Amounts of the outstanding Swing-Line Advances at such time; and (b) its Available Commitment at such time. "Available Swing-Line Facility" means, at any time, the aggregate of the Available Swing-Line Commitments at such time and, for the purposes of Clause 7.2(b) and Clause 7.3(a) and a proposed Swing-Line Advance only, adjusted so as to take into account: -2- (a) any Adjustment Amounts; and (b) any reduction in the Commitment or Swing-Line Commitment of a Swing- Line Bank which will occur prior to the commencement of the Term relating to such proposed Swing-Line Advance consequent upon a cancellation of the whole or any part of the Commitment of such Swing- Line Bank pursuant to the terms hereof. "Banks" means: (a) any financial institution named in Part 1 of the First Schedule (The Banks) (other than one which has ceased to be a party hereto in accordance with the terms hereof); and (b) any financial institution which has become a party hereto in accordance with the provisions of Clause 35.4 (Assignments by Banks) or Clause 35.5 (Transfers by Banks). "Code" means the United States Internal Revenue Code of 1986. "Commitment" means, in relation to a Bank at any time and save as otherwise provided herein, the amount set opposite its name in Part 1 of the First Schedule (The Banks). "Dollar Amount" means: (a) in relation to any Advance, the principal amount thereof or, if such Advance is not denominated in dollars, the equivalent of such amount in dollars calculated as at the date of the Utilisation Request in respect of such Advance; and (b) in relation to any Letter of Credit: (i) at or before the Utilisation Date in respect of such Letter of Credit, the face amount thereof; and (ii) thereafter, the sum at such time of the maximum actual and contingent liabilities of the Issuing Bank under such Letter of Credit and the total amount of any payments made by the Issuing Bank thereunder which at such time have not been paid or reimbursed by any Obligor to the Issuing Bank hereunder, and the Dollar Amount of a Requested Amount shall be determined accordingly. "Employee Plan" shall mean an "employee pension benefit plan" as defined in Section 3(2) of ERISA, other than a Multiemployer Plan, which is maintained for, or under which contributions are made on behalf of, employees of any Obligor or any ERISA Affiliate. "Environment" means: (a) land including any natural or man-made structures; (b) water including ground waters and waters in drains and sewers; and (c) air including air within buildings and other natural or man-made structures above or below ground. -3- "Environmental Laws" means all and any applicable laws, including common law, statute and subordinate legislation, European Community Regulations and Directives and judgments and decisions, including notices, orders or circulars, of any court or authority competent to make such judgment or decision compliance with which is mandatory for any member of the Group in any jurisdiction with regard to: (a) the pollution or protection of the Environment; (b) harm to the health of humans, animals or plants including laws relating to public and workers' health and safety; (c) emissions, discharges or releases into the Environment of chemicals or any other pollutants or contaminants or industrial, radioactive, dangerous, toxic or hazardous substances or wastes (whether in solid, semi-solid, liquid or gaseous form and including noise and genetically modified organisms); or (d) the manufacture, processing, use, treatment, storage, distribution, disposal, transport or handling of the substances or wastes described in (c) above. "Environmental Permits" means all and any permits, licences, consents, approvals, certificates, qualifications, specifications, registrations and other authorisations including any conditions which attach to any of the foregoing and the filing of all notifications, reports and assessments required under Environmental Laws for the operation of any business. "ERISA" shall mean, at any date, the US Employee Retirement Income Security Act of 1974 and the regulations promulgated and rulings issued thereunder, all as the same shall be in effect at such date. "ERISA Affiliate" shall mean any person that for the purposes of Title I and Title IV of ERISA and Section 412 of the Code is a member of any Obligor's controlled group, or under common control with any Obligor, within the meaning of Section 414 (b) and (c) of the Code and the regulations promulgated and rulings issued thereunder. "ERISA Event" shall mean (i) (A) any reportable event, as defined in Section 4043(c) of ERISA with respect to an Employee Plan, as to which PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within thirty days of the occurrence of such event (provided that a failure to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA shall be a reportable event for the purposes of this sub- paragraph (i) regardless of the issuance of any waivers in accordance with Section 412(d) of the Code); or (B) the requirements of subsection (1) of Section 4043(b) of ERISA (without regard to subsection (2) of such Section) are met with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of an Employee Plan and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Employee Plan within the following 30 days; (ii) the filing under Section 4041(c) of ERISA of a notice of intent to terminate any Employee Plan or the termination of any Employee Plan under Section 4042 of ERISA by the PBGC, or the appointment of a trustee to administer any Employee Plan under Section 4042 of ERISA; (iii) the failure to make a required contribution to any Employee Plan that would result in the imposition of a lien under Section 412 (n) of the Code or Section 302 (f) of ERISA; and (iv) an engagement in a non- exempt prohibited transaction within the meaning of Section 4795 of the Code or Section 406 of ERISA. "Event of Default" means any of those circumstances specified in Clause 25 (Events of Default). -4- "Existing Facilities" means the following facilities: (a) the $400,000,000 revolving credit facility granted pursuant to an agreement dated 29 March 1994 in favour of the Principal Company by certain financial institutions named therein for whom ABN AMRO Bank N.V. acted as Facility Agent; (b) the $600,000,000 Credit Agreement among The Stop & Shop Companies, Inc., the several Banks and The Chase Manhattan Bank as Agent, dated 29 August 1994; (c) the $200,000,000 Credit Agreement among The Stop & Shop Companies, Inc. the several Banks and The Chase Manhattan Bank as Agent, dated 19 January 1996; and (d) the $200,000,000 Credit Agreement among The Shop & Stop Master Trust, the several Banks and The Chase Manhattan Bank as Agent, dated 12 January 1995. "Existing Letter of Credit" means a Letter of Credit, details of which are set out in the Sixth Schedule. "Expiry Date" means, in relation to any Letter of Credit or Existing Letter of Credit, the date on which the maximum aggregate liability thereunder is to be reduced to zero. "Facilities" means the Revolving Credit Facility, the Letter of Credit Facility, the Swing-Line Facility and the Short-Term Advances Facility (and "Facility" means any one of them). "Facility Office" means: (a) in relation to any Agent, the office identified with such Agent's signature below or such other office as it may from time to time select; and (b) in relation to any Bank and any Facility, the office identified with its signature below (or, in the case of a Transferee, at the end of the Transfer Certificate to which it is a party as Transferee) for the purposes of such Facility or, in any such case, such other office as such Bank may from time to time select. "Federal Funds Rate" means, in relation to any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the United States Federal Reserve System arranged by Federal funds brokers, as published for that day (or, if that day is not a business day in New York, for the immediately preceding business day in New York) by the Federal Reserve Bank of New York or, if a rate is not so published for any day which is a business day in New York, the average of the quotations for that day on such transactions received by the Swing-Line Agent from three Federal funds brokers of recognised standing selected by the Swing-Line Agent. "Finance Documents" means this Agreement (as supplemented by any Supplemental Agreement) and each Supplemental Agreement. "Financial L/C Commission Rate" means: (i) during the period commencing on the date hereof and ending on the date which is the fifth anniversary of the date hereof, 0.10 per cent. per annum; and (ii) thereafter, 0.1125 per cent. per annum. -5- "Financial Letter of Credit" means a Letter of Credit issued in favour of any contractor or state agency for the purposes of credit guarantees in relation to the construction of property and self insurance schemes (such as workers' compensation programmes). "Guarantors" means the Principal Company and Ahold USA in their respective capacities as guarantors hereunder. "Group" means the Principal Company and its subsidiaries for the time being. "Instructing Group" means: (a) whilst no Advances or Letters of Credit are outstanding hereunder and in any event for the purposes of Clause 39, a Bank or group of Banks whose Commitments at such time (or, if each Bank's Commitment has been reduced to zero, did immediately before such reduction to zero) amount in aggregate to more than sixty-six and two thirds per cent. of the Total Commitments at such time; or (b) at any time that there are one or more Advances or Letters of Credit outstanding hereunder, a Bank or group of Banks to whom more than sixty-six and two thirds per cent. of the Outstandings at such time is owed (other than the Dollar Amount of Swing-Line Advances and Short- Term Advances). "Issuing Bank" means any Bank which, at the time of the Utilisation Request relating to the relevant Letter of Credit, has a long-term debt rating by Standard & Poor's of not less than AA- or by Moody's Investors Service, Inc. of not less than Aa3 as selected by Ahold USA or such alternative equivalent long term debt rating as may be applied by Standard & Poor's or Moody's Investors Service, Inc., respectively, from time to time. "L/C Outstandings" means, at any time, the aggregate of the Dollar Amounts of each outstanding Letter of Credit (and for the purposes of this definition an "outstanding" Existing Letter of Credit shall mean an Existing Letter of Credit in which the Banks are participating in, in accordance with Clause 4). "Letter of Credit" means a letter of credit (including, without limitation, except for the purposes of Clause 4, an Existing Letter of Credit) issued or to be issued by an Issuing Bank, subject to and with the benefit of the provisions hereof, under the Letter of Credit Facility. "Letter of Credit Commitment" means, in relation to a Bank at any time and save as otherwise provided herein, the amount set opposite its name in Part 1 of the First Schedule. "Letter of Credit Facility" means the letter of credit facility granted to Ahold USA pursuant to the terms of this Agreement. "LIBOR" means, in relation to any Revolving Credit Advance or Short-Term Advance or unpaid sum in respect of the Revolving Credit Facility or Short-Term Advances Facility: (i) the rate per annum which is the offered rate (if any) appearing on the relevant page of the Telerate Screen which displays British Bankers' Association Settlement Rates for deposits in the London Interbank Market for the specified period denominated in the currency in which such Revolving Credit Advance, Short-Term Advance or unpaid sum is to be or is -6- denominated during the specified period at or about 11.00 a.m. on the Quotation Date for the specified period; or (ii) in the event no such rate can be determined for the specified period in accordance with (i) above, the rate per annum determined by the Multicurrency Facility Agent to be equal to the arithmetic mean (rounded upwards to four decimal places) of the rates (as notified to the Multicurrency Facility Agent) at which each of the Reference Banks was offering to prime banks in the London Interbank Market deposits in the currency in which such Revolving Credit Advance, Short-Term Advance or unpaid sum is to be or is denominated for the specified period at or about 11.00 a.m. on the Quotation Date for such period and for the purposes of this definition, "specified period" means the Term of such Revolving Credit Advance or Short-Term Advance or, as the case may be, the period in respect of which LIBOR falls to be determined in relation to such unpaid sum. "Margin" means: (i) during the period commencing on the date hereof and ending on the date which is the fifth anniversary of the date hereof, 0.10 per cent. per annum; and (ii) thereafter, 0.1125 per cent. per annum. "Margin Stock" means margin stock within the meaning of Regulations T, U and X. "Material Subsidiary" means, at any time: (i) any subsidiary of the Principal Company the assets of which exceed ten per cent. (10%) of the consolidated assets of the Group taken as a whole; and (ii) each other subsidiary of the Principal Company specified from time to time by the Principal Company (which, at the date hereof and without limitation to the foregoing, are the companies listed in the Fifth Schedule) Provided that the Principal Company shall ensure that the assets of all subsidiaries referred to in paragraphs (i) and (ii) shall at all times account for at least 80 per cent. of the consolidated assets of the Principal Company and its subsidiaries and for these purposes, the assets of such subsidiary or the Principal Company and its subsidiaries (as the case may be) shall, in each case be adjusted, as the Facility Agent acting on the instructions of an Instructing Group may consider appropriate, to take account of any changes in circumstances since the date as of which the most recent audited consolidated financial statements were prepared. "Multiemployer Plan" means a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) maintained or contributed to for employees of (i) any Obligor or (ii) any ERISA Affiliate. "Non-Financial L/C Commission Rate" means 0.15 per cent. per annum. "Non-Financial Letter of Credit" means any Letter of Credit other than a Financial Letter of Credit. "Obligors" means the Borrowers and the Guarantors (and "Obligor" means anyone of them). -7- "Optional Currency" means any currency (other than ecu, sterling and dollars) which is freely transferable and freely convertible into dollars. "Original Financial Statements" means: (a) in relation to the Principal Company, its audited consolidated financial statements for its financial year ended 31 December 1995; and (b) in relation to each Additional Borrower, its most recently published audited financial statements as at the date it becomes an Additional Borrower hereunder. "Outstandings" means, at any time, the aggregate of: (a) the Dollar Amounts of all outstanding Advances; and (b) the L/C Outstandings. "Participation" in relation to a Bank at any time means the aggregate of such Bank's Available Commitment at such time and its share of all Outstandings at such time; "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to all or any of its functions under ERISA. "Potential Event of Default" means any event which could or would become (with the passage of time, the giving of notice, the making of any determination hereunder or any combination thereof) an Event of Default. "Prime Rate" means, on any day, the prime commercial lending rate publicly announced by the Swing-Line Agent in respect of such day, which rate need not be the lowest rate charged to its borrowers Provided that each change in the interest rate applicable to a Swing-Line Advance which results from a change in the Prime Rate shall become effective on the day on which the change in the Prime Rate becomes effective. "Proportion" means, in relation to a Bank, the proportion borne by its Commitment to the Total Commitments (or, if the Total Commitments are then zero, by its Commitment to the Total Commitments immediately prior to their reduction to zero). "Quotation Date" means, in relation to any period for which LIBOR is to be determined hereunder, the day which is two business days prior to the first day of such period. "Reference Banks" means, for the purposes of determining LIBOR, the principal London offices of ABN AMRO Bank N.V., The Chase Manhattan Bank and Morgan Guaranty Trust Company of New York or such other bank or banks as may from time to time be agreed between the Principal Company and the Facility Agent. "Regulation D Costs" means, in relation to the portion of any Advance made by a Bank to a US Borrower (or deposits maintained by a Bank to fund such an Advance), the amount (if any) certified by such Bank to be the cost to it of complying with Regulation D (or any similar reserve requirements) in respect of that Advance or those deposits. "Regulations D, T, U and X" means, respectively, Regulations D, T, U and X of the Board of Governors of the Federal Reserve System of the United States (or any successor). -8- "Relevant Amount" means, in relation to any Bank or Swing-Line Bank at any time and any proposed Utilisation, the amount arrived at by applying the following formula: Relevant Amount = BC x (RA + TO) -------------- - BO TC where: BC = such Bank's or Swing-Line Bank's Commitment at such time; RA = the Dollar Amount of the Advance or Letter of Credit comprising such proposed Utilisation; TO = the Outstandings at such time; TC = the Total Commitments at such time; BO = the relevant Bank or Swing-Line Bank's share of all Outstandings at such time, Provided that when in respect of any one or more Banks or Swing-Line Banks application of the above formula results in a negative figure, then for the purpose of calculating the Relevant Amount for each other Bank or Swing-Line Bank, the first mentioned Bank(s) or Swing-Line Bank(s) and it or their Commitment(s) (and that of any affiliates thereof) shall be deducted from "TC" and the aggregate of such Bank's or Swing-Line Bank's share of all Outstandings shall be deducted from "TO". "Repayment Date" means, in relation to any Advance, the last day of the Term thereof or such earlier date upon which such Advance is required to be repaid pursuant hereto. "Requested Amount" means, in relation to any Utilisation Request, the aggregate principal amount of the Advances or, as the case may be, the face amount of the Letter of Credit therein requested to be made or issued or in which the Banks are requested to participate. "Revolving Credit Advance" means, save as otherwise provided herein, an advance made or to be made by the Banks pursuant to Clause 3 (Utilisation of the Revolving Credit Advance) and the other terms hereof. "Revolving Credit Facility" means the multicurrency revolving credit facility granted to the Borrowers pursuant to the terms of this Agreement. "Short-Term Advance" means, save as otherwise provided herein, an advance made or to be made by the Banks pursuant to Clause 8 (Request for Offers) and the other terms hereof. "Short-Term Advances Facility" means the short term advances facility granted to Ahold USA pursuant to the terms of this Agreement. "Substantial" means equal to or greater than 10 per cent. of the relevant amount as disclosed by the latest audited consolidated balance sheet or, as the case may be, profit and loss account of the Group. -9- "Supplemental Agreement" means any agreement entered into by the parties hereto with any Additional Borrower (in its capacity as an Additional Obligor) pursuant to Clause 2.9 (Nomination of Additional Borrowers) to Clause 2.12 (Original Borrower's Authority) substantially in the form set out in the Eighth Schedule (Supplemental Agreement for Additional Borrowers) or such other form as the Principal Company and the Facility Agent shall agree. "Swing-Line Advance" means, save as otherwise provided herein, an advance made or to be made by the Swing-Line Banks pursuant to Clause 7 (Utilisation of the Swing-Line Facility) and the other terms hereof. "Swing-Line Banks" means each of the Banks listed in Part 2 of the First Schedule (Swing-Line Banks). "Swing-Line Commitment" means, in relation to a Swing-Line Bank at any time and save as otherwise provided herein, the amount set opposite its name in Part 2 of the First Schedule. "Swing-Line Facility" means the swing-line facility granted to the Borrowers pursuant to the terms of this Agreement. "Swing-Line Margin" means 0.50 per cent. per annum. "Term" means, save as otherwise provided herein, in relation to any Advance, the period for which such Advance is borrowed (as specified in the Utilisation Request relating thereto) and, in relation to any Letter of Credit, the period from the date on which such Letter of Credit is issued (or, in the case of an Existing Letter of Credit, the Banks commence participating in such Existing Letter of Credit pursuant to Clause 4) until its Expiry Date (as specified in the Utilisation Request relating thereto). "Termination Date" means the day which is eighty-four months after the date hereof. "Total Commitments" means the aggregate for the time being of the Banks' Commitments. "Transfer Certificate" means a certificate substantially in the form set out in the Second Schedule (Form of Transfer Certificate) signed by a Bank and a Transferee whereby: (a) such Bank seeks to procure the transfer to such Transferee of all or a part of such Bank's rights, benefits and obligations hereunder as contemplated in Clause 35.3 (Assignments and Transfers by Banks); and (b) such Transferee undertakes to perform the obligations it will assume as a result of delivery of such certificate to the Facility Agent as is contemplated in Clause 35.5 (Transfers by Banks). "Transfer Date" means, in relation to any Transfer Certificate, the date for the making of the transfer as specified in the schedule to such Transfer Certificate. "Transferee" means a bank or other financial institution to which a Bank seeks to transfer all or part of such Bank's rights, benefits and obligations hereunder. "United States" and "US" means the United States of America (including the District of Columbia), its territories, possessions and other areas subject to the jurisdiction of the United States of America. -10- "US Borrower" means any Material Subsidiary which has been incorporated in the United States. "US Obligor" means any Obligor incorporated in the United States. "Utilisation" means a utilisation of any or more of the Facilities hereunder. "Utilisation Date" means the date of a Utilisation, being the date on which the Advance in respect thereof is to be made or the Letter of Credit in respect thereof is to be issued (or, in relation to an Existing Letter of Credit, the date on which the Banks are to commence participating therein). "Utilisation Request" means a notice substantially in the form set out in the Fourth Schedule (Utilisation Request). "Withdrawal Liability" has the meaning given to such term under Part I of Subtitle E of Title IV of ERISA. 1.2 Interpretation Any reference in this Agreement to: any Agent or any Bank in any capacity hereunder shall be construed so as to include its and any subsequent successors, Transferees and assigns in accordance with their respective interests; "affiliate" of any person is a reference to a holding company or a subsidiary, or a subsidiary of a holding company, of such person; any "applicable law" shall be construed so as to include all present and future applicable laws, statutes, regulations, codes, treaties, conventions, judgments, awards, determinations or decrees; "borrowed money" means, in respect of any person: (i) money borrowed or raised and premiums (if any) and capitalised interest in respect thereof; (ii) the principal and premiums (if any) and capitalised interest in respect of any debenture, bond, note, loan stock or similar instrument; (iii) liabilities in respect of any letter of credit, acceptance credit, bill discounting or note purchase facility and any receivables purchase, factoring or discounting arrangement; (iv) rental or hire payments under leases or hire purchase agreements (whether in respect of land, machinery, equipment or otherwise) entered into primarily for the purpose of raising finance; (v) the deferred purchase price of assets or services in respect of transactions which have the commercial effect of borrowing or which otherwise finance its or the Group's operations or capital requirements (except any such arrangements entered into in the ordinary and usual course of trading and having a term not exceeding 90 days from the date on which the liability was originally incurred); (vi) liabilities in respect of any foreign exchange agreement, currency or interest purchase or swap transactions or similar arrangements; (vii) all obligations to purchase, redeem, retire, defease or otherwise acquire for value any share capital of any person or any warrants, rights or options to acquire such share capital in respect of transactions which -11- have the commercial effect of borrowing or which otherwise finance its or the Group's operations or capital requirements; (viii) any other transactions having the commercial effect of borrowing entered into by any person to finance its operations or capital requirements; and (ix) all indebtedness for borrowed money of other persons referred to in paragraphs (i) to (viii) above guaranteed directly or indirectly in any manner by such person, or having the commercial effect of being guaranteed directly or indirectly by such person by virtue of an agreement (a) to pay or purchase such indebtedness for borrowed money or to advance or supply funds for the payment or purchase of such indebtedness for borrowed money, (b) to purchase or lease (as lessee) property, or to purchase services, primarily for the purpose of enabling the debtor to make payments of such indebtedness for borrowed money, (c) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property of services irrespective of whether such property is received or such services are rendered) or (d) otherwise to assure any person to whom indebtedness for borrowed money is owed against loss with respect thereto; a "business day" shall be construed as a reference to a day (other than a Saturday or Sunday) on which banks are generally open for business in London and New York City and, if such reference relates to the date for the payment of any sum denominated in any Optional Currency, banks are generally open for business in the principal financial centre of the country of such Optional Currency; a "business day in New York" shall be construed as a reference to a day (other than a Saturday or a Sunday) on which banks are generally open for business in New York City; a "Clause" shall, subject to any contrary indication, be construed as a reference to a clause hereof; a "currency" includes ecu; "encumbrance" means any mortgage, pledge, lien (other than a lien arising solely by operation of law in the ordinary course of business), charge, assignment, hypothecation, security interest or other encumbrance or charge by way of security or any title retention right (other than in the ordinary course of trading), preferential right (other than a preferential right accorded to creditors on a liquidation solely by operation of law) or trust arrangement or other agreement or arrangement the effect of any of which is the creation of security; the "equivalent" on any given date in one currency (the "first currency") of an amount denominated in another currency (the "second currency") is a reference to the amount of the first currency which could be purchased with the amount of the second currency at the spot rate of exchange quoted by the Facility Agent at or about 12.00 (noon) London time on such date for the purchase of the first currency with the second currency; a "holding company" of a company or corporation shall be construed as a reference to any company or corporation of which the first-mentioned company or corporation is a subsidiary; "indebtedness" shall be construed so as to include any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent; a "month" is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next succeeding calendar month save that, where any such period would otherwise end on a day which is not a business day, it shall end on the next succeeding business day, unless that day falls in the -12- calendar month succeeding that in which it would otherwise have ended, in which case it shall end on the immediately preceding business day Provided that, if a period starts on the last business day in a calendar month or if there is no numerically corresponding day in the month in which that period ends, that period shall end on the last business day in that later month (and references to "months" shall be construed accordingly); "net assets" shall be construed as a reference to the difference between (a) the aggregate of the current assets (including but not limited to Cash and cash Equivalents, Receivables and Inventories) and fixed assets (including but not limited to Total Net Tangible Fixed Assets, Loan Receivables, Investments in unconsolidated subsidiaries and affiliates and Intangible Assets) of the Principal Company and (b) the aggregate of the current liabilities (including but not limited to Loans payable, Taxes payable, Accounts payable, Accrued expenses and Other current liabilities) and long term liabilities (including but not limited to Subordinated loans, Other loans, Capitalised lease commitments, Deferred income taxes and Other provisions) of the Principal Company in each case as reported in the latest consolidated balance sheet of the Principal Company delivered pursuant to Clause 24(i)(a) (Undertakings); a "person" shall be construed as a reference to any person, firm, company, corporation, government, state or agency of a state or any association or partnership (whether or not having separate legal personality) of two or more of the foregoing; a "subsidiary" of the Principal Company means a company which is a subsidiary of the Principal Company within the meaning of Article 24.a of the Dutch Civil Code and which is a company which is consolidated in the consolidated financial statements of the Principal Company; a "subsidiary" of a company or corporation other than the Principal Company shall be construed as a reference to any company or corporation: (a) which is controlled, directly or indirectly, by the first-mentioned company or corporation; (b) more than half the issued share capital of which is beneficially owned, directly or indirectly, by the first-mentioned company or corporation; or (c) which is a subsidiary of another subsidiary of the first-mentioned company or corporation and, for these purposes, a company or corporation shall be treated as being controlled by another if that other company or corporation is able to direct its affairs and/or to control the composition of its board of directors or equivalent body; "tax" shall be construed so as to include any tax, levy, impost, duty or other charge of a similar nature (including, without limitation, any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same); "VAT" shall be construed as a reference to value added tax including any similar tax which may be imposed in place thereof from time to time; and the "winding-up", "dissolution" or "administration" of a company or corporation shall be construed so as to include any equivalent or analogous proceedings under the law of the jurisdiction in which such company or corporation is incorporated or any jurisdiction in which such company or corporation carries on business including the seeking of liquidation, winding-up, reorganisation, dissolution, administration, arrangement, adjustment, protection or relief of debtors. -13- 1.3 Currency Symbols "$" and "dollars" denote lawful currency of the United States of America and "sterling" denotes lawful currency of the United Kingdom. 1.4 Agreements, Documents and Statutes Save where the contrary is indicated, any reference in this Agreement to: (a) this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied, novated or supplemented; (b) a statute shall be construed as a reference to such statute as the same may have been, or may from time to time be, amended or re- enacted; and (c) a time of day shall be construed as a reference to New York time. 1.5 Headings Clause, Part and Schedule headings are for ease of reference only. -14- PART 2 THE FACILITIES; ADDITIONAL BORROWERS 2. The Facilities 2.1 Revolving Credit Facility The Banks grant to the Borrowers, upon the terms and subject to the conditions hereof, a multicurrency revolving credit facility in an aggregate amount of $1,000,000,000 or its equivalent from time to time in Optional Currencies. 2.2 Letter of Credit Facility The Banks grant to Ahold USA, upon the terms and subject to the conditions hereof, a dollar denominated letter of credit facility in an aggregate amount of $100,000,000. 2.3 Swing-Line Facility The Swing-Line Banks grant to the Borrowers, upon the terms and subject to the conditions hereof, a dollar denominated swing-line facility in an aggregate amount of $200,000,000. 2.4 Short-Term Advances Facility The Banks grant to Ahold USA, upon the terms and subject to the conditions hereof, an uncommitted short term advances facility in an aggregate amount of $1,000,000,000. 2.5 Purpose and Application The Facilities are intended for general corporate purposes including working capital and the refinancing of the Existing Facilities. Accordingly, each of the Borrowers shall apply all amounts raised by it under each Facility in or towards satisfaction of such purposes. Without prejudice to the obligations of the Borrowers under this Clause 2.5 (Purpose and Application), neither the Agents, the Arrangers and the Banks nor any of them shall be obliged to concern themselves with the application of amounts raised by any Borrower hereunder. 2.6 Condition Precedent Documents None of the Borrowers may deliver any Utilisation Request hereunder unless the Facility Agent has confirmed to the Principal Company and the Banks that it has received all of the documents listed in the Third Schedule (Condition Precedent Documents) each, in form and substance, satisfactory to the Facility Agent and that each of the other conditions referred to therein have been met to the satisfaction of the Facility Agent. 2.7 Banks' Obligations Several The obligations of each Bank hereunder are several. The failure by a Bank to perform its obligations hereunder shall not affect the obligations of any Obligor towards any other party hereto nor shall any other party be liable for the failure by such Bank to perform its obligations hereunder. The amounts outstanding at any time hereunder from a Borrower to any of the parties hereto shall, subject as otherwise provided herein, be a separate and independent debt and each such party shall, subject to the terms of this Agreement, be entitled to protect and enforce its individual rights arising out of this Agreement independently of any other party and it shall not be necessary for any party hereto to be joined as an additional party in any proceedings for this purpose. 2.8 Aggregation of Advances Clause 2.1 (Revolving Credit Facility), Clause 2.2 (Letter of Credit Facility), Clause 2.3 (Swing-Line Facility) and Clause 2.4 (Short-Term Advances Facility) are subject to the restriction that at no time may the aggregate of the Dollar Amounts of all outstanding Advances and Letters of Credit under each of the Facilities referred to in such Clauses exceed the Total Commitments, (being, at the date hereof, $1,000,000,000). 2.9 Nomination of Additional Borrowers Subject to having obtained the prior written consent, through the Facility Agent, of all the Banks, the Principal Company may from time to time designate any of its wholly-owned subsidiaries as an Additional Borrower. If the Principal Company so designates any such subsidiary or -15- subsidiaries, the Principal Company shall promptly deliver or cause to be delivered to the Facility Agent a Supplemental Agreement duly executed by the parties thereto. 2.10 Accession of Additional Borrowers Promptly on receipt by it of each of the conditions precedent specified in any Supplemental Agreement, the Facility Agent will confirm to the relevant Additional Borrower, the Principal Company and the Banks that it has received such documents and whether or not each is, in form and substance, satisfactory to it. Upon delivery to the Facility Agent of any Supplemental Agreement and subject to the Facility Agent having confirmed to the relevant Additional Borrower, the Principal Company and the Banks that it has received, in form and substance satisfactory to it, each of the conditions precedent specified therein, this Agreement shall thenceforth be read and construed as if each subsidiary of the Principal Company which is a party to the Supplemental Agreement as an Additional Borrower were a party hereto having all the rights and obligations of a Borrower. Accordingly all references in any Finance Document to (a) any "Additional Borrower", "Borrower", "Obligor" or any derivative term, shall be treated as including a reference to any such subsidiary becoming a party hereto in the manner contemplated above; and (b) this Agreement, shall be treated as a reference to this Agreement as supplemented by such Supplemental Agreement and all previous Supplemental Agreements to the intent that this Agreement, such Supplemental Agreement and all previous Supplemental Agreements shall be read and construed together as one single agreement. 2.11 Facility Agent's Authority Each of the Agents (other than the Facility Agent), the Arranger and the Banks irrevocably authorises the Facility Agent to execute any Supplemental Agreement on its behalf. The Facility Agent shall promptly notify each of the Banks of the execution by it of any Supplemental Agreement. 2.12 Original Borrower's Authority Each of the Obligors (other than the Principal Company) irrevocably authorises the Principal Company to designate any of its subsidiaries as an Additional Borrower pursuant to Clause 2.9 (Nomination of Additional Borrowers) and irrevocably authorises the Principal Company to execute on its behalf any Supplemental Agreement in relation thereto. 2.13 Separate and Independent Facilities Subject to Clause 2.8 (Aggregation of Advances), the Facilities granted in this Agreement are separate and independent of each other. The aggregate of the amounts outstanding at any time under each Facility shall be a separate and independent debt. 2.14 Use of Facilities Any Bank may, by notice to the Facility Agent, designate another bank or financial institution (a "Funding Bank") to make available to the relevant Agent the proceeds of that Bank's share of any Advance or to make payments in respect of any Letter of Credit (in which case that Bank shall ensure that the Funding Bank does so). Any such notice shall specify the name of the Funding Bank and its fax number and address (which must be in New York City) and marking (if any) for the purpose of communications to it in relation to the relevant Facility. A copy of any written communication to that Bank shall be sent to the Funding Bank (which need not be a party to this Agreement nor an affiliate of that Swingline Bank). Whether or not the Funding Bank is a party to this Agreement, all rights and obligations with respect to that Bank's Commitment and its Outstandings under the Facilities shall remain solely in that Bank (not the Funding Bank) and this Agreement shall apply as if that Bank (rather than the Funding Bank) had funded its share of each Advance or Letter of Credit, except that the Bank may direct that its share of any payment with respect to the relevant Facility be made to the Funding Bank instead. -16- PART 3 UTILISATION OF THE REVOLVING CREDIT FACILITY 3. Utilisation of the Revolving Credit Facility 3.1 Delivery of Utilisation Request for Revolving Credit Advances Save as otherwise provided herein, a Borrower may from time to time request the making of Revolving Credit Advances under the Revolving Credit Facility by the delivery to the Facility Agent and, in the case of a Revolving Credit Advance denominated in an Optional Currency, the Multicurrency Facility Agent not more than eight business days nor later than three (or, in the case of a Revolving Credit Advance denominated in any Optional Currency four) business days before the proposed date for the making of the relevant Revolving Credit Advance, of a duly completed Utilisation Request therefor. 3.2 Utilisation Details Each Utilisation Request delivered to the Facility Agent and Multicurrency Facility Agent pursuant to Clause 3.1 (Delivery of Utilisation Request for Revolving Credit Advances) shall be irrevocable and shall specify: (a) the proposed date for the making of the relevant Revolving Credit Advance which shall be a business day falling before the Termination Date; (b) the currency of denomination of the proposed Revolving Credit Advance which shall be dollars or an Optional Currency Provided that, if the relevant Borrower selects an Optional Currency, such Borrower may also select dollars to apply if its first selection becomes ineffective pursuant to Clause 3.3 (Banks' Agreement to Optional Currency); (c) the amount of the proposed Revolving Credit Advance, which shall be an amount of not less than $25,000,000 and an integral multiple of $5,000,000 (or, if the Revolving Credit Advance is to be denominated in an Optional Currency, such comparable and convenient amount thereof as the Multicurrency Facility Agent may from time to time specify) and the Dollar Amount of which shall not exceed the Available Facility; (d) the proposed Term of the proposed Revolving Credit Advance, which shall be a period of one, two, three or six months or such other period not exceeding twelve months agreed by the Banks ending on a business day falling on or before the Termination Date; and (e) the account to which the proceeds of the proposed Revolving Credit Advance are to be paid. 3.3 Banks' Agreement to Optional Currency If a Borrower requests that a Revolving Credit Advance be denominated in an Optional Currency and: (a) no later than 12.00 noon (London time) on the third business day preceding the first day of the Term of such Revolving Credit Advance, any Bank notifies the Multicurrency Facility Agent that it does not agree to such request; or (b) no later than 11.00 a.m. (London time) on the Quotation Date for such Revolving Credit Advance, the Facility Agent notifies the Borrower and the Banks that the Multicurrency Facility Agent is of the reasonable opinion that it is not feasible for such Revolving Credit Advance to be made in such Optional Currency; or -17- (c) to give effect to such request would mean that the Revolving Credit Advances outstanding would be denominated in more than three Optional Currencies, then, unless such Borrower and the Banks otherwise agree, such Revolving Credit Advance shall not be made unless such Borrower specified in the Utilisation Request in respect of such Revolving Credit Advance that in such event such Revolving Credit Advance should be denominated in dollars in which case such Revolving Credit Advance shall, save as otherwise provided herein, be made in dollars in an amount equal to the Dollar Amount relating to such Utilisation Request. 3.4 Making of Revolving Credit Advances If a Borrower requests a Revolving Credit Advance in accordance with the provisions of this Clause 3 and, on the proposed date for the making of such Advance: (a) none of the events mentioned in Clause 22(a) and (b) (Market Disruption) shall have occurred; (b) the Dollar Amount of such Revolving Credit Advance does not exceed the Available Facility; (c) to give effect to such request would not result in more than ten Advances being outstanding; and (d) either: (i) no Event of Default or Potential Event of Default has occurred and is continuing or would result from the making of such Revolving Credit Advance; and (ii) the representations set out in Clause 23 (Representation and Warranties) which are to be repeated pursuant to the relevant Utilisation Request are true on and as of the proposed date for the making of such Revolving Credit Advance and would continue to be true immediately following the making of the relevant Revolving Credit Advance and the application of the proceeds thereof in meeting the purpose for the making of such Revolving Credit Advance (as if references therein to Original Financial Statements were references to the most recent set of annual audited financial statements delivered by each Borrower to the Facility Agent pursuant to Clause 24 (Undertakings)) or each of the Banks agrees, notwithstanding any matter mentioned at (i) or (ii) above to participate in the making of such Revolving Credit Advance, then: (1) the Facility Agent (or in the case of a Revolving Credit Advance denominated in an Optional Currency, the Multicurrency Facility Agent) shall, no later than 5.00 p.m. (London time) on the third business day prior to the proposed Utilisation Date, notify each Bank by telefax or by telephone (with confirmation to follow by telefax) at its Facility Office specified for the purpose of Revolving Credit Advances of the amount of such Revolving Credit Advance, the amount of such Bank's participation therein and the period for which such Revolving Credit Advance is to be made; -18- (2) each Bank shall, no later than 12.00 noon (local time for the financial centre of the relevant currency) on such proposed Utilisation Date make its portion of such Revolving Credit Advance available to the Facility Agent or in the case of a Revolving Credit Advance denominated in an Optional Currency, the Multicurrency Facility Agent), in the relevant currency, in accordance with Clause 29 (Payments); and (3) the Facility Agent (or in the case of a Revolving Credit Advance denominated in an Optional Currency, the Multicurrency Facility Agent) shall, no later than 4.00 p.m. (local time for the financial centre of the relevant currency) on such proposed Utilisation Date, make such Revolving Credit Advance available to the relevant Borrower in accordance with but subject to Clause 29 (Payments). 3.5 Facility Office Each Bank will participate in each Revolving Credit Advance made pursuant to this Clause 3 through its Facility Office specified in relation to Revolving Credit Advances in its Relevant Amount. 3.6 Reduction of Advances If a Bank's Commitment is reduced in accordance with the terms hereof after the Facility Agent (or in the case of a Revolving Credit Advance denominated in an Optional Currency, the Multicurrency Facility Agent) has received the Utilisation Request for a Revolving Credit Advance, then both the Dollar Amount and the amount of that Revolving Credit Advance shall be reduced accordingly. 3.7 Application of Advances The proceeds of any Revolving Credit Advance made hereunder shall first be applied in repayment of any Swing-Line Advance (together with any accrued interest thereon), and the Facility Agent shall pay such portion of any Revolving Credit Advance to be made hereunder to the Swing- Line Banks as the Swing-Line Agent instructs the Facility Agent is necessary to repay each outstanding Swing-Line Advance (together with any accrued interest thereon). 3.8 Payment of Swing-Line Advances Notwithstanding anything to the contrary provided herein, one or more Revolving Credit Advances (as may be necessary) will be made by the Banks to the Borrower if, prior to 10.00 a.m. on any business day, the Swing-Line Agent, on behalf of the Swing-Line Banks, gives notice to the Facility Agent that it requires each outstanding Swing-Line Advance to be repaid by means of a Revolving Credit Advance hereunder (and, for the purposes hereof such notice shall be deemed to have been automatically given by the Swing-Line Agent to the Facility Agent, if either (i) the Facility Agent receives notice from any other party hereto that an Event of Default has occurred or (ii) for any reason whatsoever the proceeds of a Revolving Credit Advance hereunder cannot be applied in the manner outlined in Clause 3.7) and, two business days after the Swing-Line Agent gives notice to the Facility Agent as aforesaid a Revolving Credit Advance will be made in respect of each outstanding Swing-Line Advance by the Banks in an amount of each such Swing-Line Advance and for a Term selected by the Facility Agent, in consultation with the Borrower, notwithstanding (a) the occurrence of an Event of Default, (b) any reduction in the Total Commitments after the date hereof or (c) any other requirements for a drawdown pursuant to any of the other provisions of this Clause 3 not being fulfilled Provided that nothing herein contained shall be construed so as to require the Banks to participate in any Revolving Credit Advance requested hereunder by the Swing-Line Agent to repay any Swing-Line Advance which was made in breach of Clause 7.2(b) or was made in the circumstances set out in Clause 7.3(b). Each Revolving Credit Bank will participate through its Facility Office in its Relevant Amount in any Revolving Credit Advance made pursuant to the terms of this Clause 3.8. -19- PART 4 UTILISATION OF THE LETTER OF CREDIT FACILITY 4. Utilisation of the Letter of Credit Facility 4.1 Delivery of Utilisation Request for Letters of Credit Save as otherwise provided herein, Ahold USA may from time to time request the issue of Letter(s) of Credit and/or that the Banks participate in the issuance of any Existing Letter(s) of Credit under the Letter of Credit Facility by the delivery to the Facility Agent, not more than eight business days in New York nor later than 9.30 a.m. on the third business day in New York before the proposed date for either (a) the issue of the relevant Letter(s) of Credit and/or (b) the effectiveness of the Banks' participating in the relevant Existing Letter(s) of Credit (as the case may be) of a duly completed Utilisation Request therefor. 4.2 Utilisation Details Each Utilisation Request delivered to the Facility Agent pursuant to Clause 4.1 (Delivery of Utilisation Request for Letters of Credit) shall be irrevocable and shall specify: (a) the face amount of (i) the proposed Letter(s) of Credit and/or (ii) Existing Letter(s) of Credit (as the case may be), which shall be an amount of not more than the Available Letter of Credit Facility; (b) the proposed Term of (i) the proposed Letter(s) of Credit and/or (ii) Existing Letter(s) of Credit (as the case may be), which shall be a period ending on a business day falling on or before the Termination Date; (c) the name and address of the recipient to whom such Letter(s) of Credit is to be delivered and/or to whom such Existing Letter(s) of Credit has been delivered (as the case may be); and (d) the Issuing Bank relating to such Letter(s) of Credit and/or Existing Letter(s) of Credit (as the case may be). 4.3 Issue of Letters of Credit If the Borrower requests the issue of a Letter of Credit and/or the participation of Banks in the issuance of any Existing Letter of Credit in accordance with the provisions of this Clause 4 and, on the proposed date for such issue and/or participation: (a) the Dollar Amount of such Letter(s) of Credit and (if applicable) Existing Letter(s) of Credit does not exceed the Available Letter of Credit Facility; (b) the identity of the recipient has been agreed by all the Banks no later than 3.00 p.m. (New York Time) on the third business day in New York before the proposed date for the issue of the relevant Letter(s) of Credit or participation in the relevant Existing Letter(s) of Credit; (c) (in relation to any new Letter of Credit) the form of such Letter(s) of Credit is such form as has been agreed between the relevant Borrower and the Issuing Bank (acting on the instructions of the Banks) by no later than 3.00 p.m. (New York Time) on the third business day in New York before the date from the issue of such Letter(s) of Credit; (d) either: -20- (i) no Event of Default or Potential Event of Default has occurred and is continuing or would result from the issue of such Letter(s) of Credit or participation by the Banks in such Existing Letter(s) of Credit; and (ii) the representations set out in Clause 23 (Representations and Warranties) which are to be repeated pursuant to the relevant Utilisation Request are true on and as of the proposed date for the issue of such Letter(s) of Credit and/or participation in such Existing Letter(s) of Credit (as the case may be) and would continue to be true immediately following the issuing of the relevant Letter(s) of Credit and/or participation in such Existing Letter(s) of Credit (as the case may be) (as if references therein to Original Financial Statements were references to the most recent set of annual audited financial statements delivered by each Borrower to the Facility Agent pursuant to Clause 24 (Undertakings)) or each of the Banks agrees, notwithstanding any matter mentioned at (i) or (ii) above to the issue of such Letter of Credit and/or participation in such Existing Letter(s) of Credit (as the case may be), then: (1) the Facility Agent shall, no later than 5.00 p.m. (New York Time) on the third business day prior to the proposed Utilisation Date, notify each Bank and the Issuing Bank by telefax or by telephone (with confirmation to follow by telefax) at its Facility Office specified for the purpose of the Letter of Credit Facility of the amount of such Letter(s) of Credit and/or Existing Letter(s) of Credit (as the case may be), the amount of such Bank's participation therein and the Term of such Letter(s) of Credit and/or Existing Letter(s) of Credit (as the case may be); and (2) (in the case of any new Letter(s) of Credit) the Issuing Bank shall on such proposed Utilisation Date, issue such Letter of Credit to the relevant recipient Provided that, if the issue of such proposed new Letter(s) of Credit to the proposed beneficiary is prohibited under any law, statute, regulation, order or decree to which a Bank is subject or pursuant to any request or requirement of any central bank or other fiscal, monetary or other authority to which a Bank is subject, the Issuing Bank shall not be obliged to issue such proposed new Letter(s) of Credit. 4.4 Banks' Participation in Letters of Credit Each Bank will participate in the issuance of each Letter of Credit and each Existing Letter of Credit through its Facility Office specified in relation to the Letter of Credit Facility to the extent of its Relevant Amount. 4.5 Reduction of Banks' Letter of Credit Commitments If a Bank's Commitment is reduced in accordance with the terms hereof after the Facility Agent has received the Utilisation Request for any Letter(s) of Credit and/or Existing Letter(s) of Credit, then both the Dollar Amount and the amount of such Letter(s) of Credit and/or Existing Letter(s) of Credit shall be reduced accordingly. 4.6 Completion of Letters of Credit The Issuing Bank relating to any Letter of Credit is hereby authorised to issue such Letter of Credit pursuant to Clause 4.3 (Issue of Letters of Credit) by: (a) completing the issue date and Expiry Date of such Letter of Credit; and -21- (b) executing and delivering such Letter of Credit to the relevant recipient on the Utilisation Date. 5. Indemnity 5.1 Demand for Payment If, at any time, a demand for payment (the amount so demanded being herein referred to as the "Amount Demanded") is made under a Letter of Credit the Issuing Bank relating to such Letter of Credit shall notify the Facility Agent who shall notify each of the Banks and Ahold USA of such demand and the Facility Agent shall make demand of each of the Banks for an amount equal to its share of the amount demanded. 5.2 Payment Each Bank shall, upon receipt by it of a demand made on it by the Facility Agent under this Clause 5 and in any event no later than 11.00 a.m. (London time) on the business day following receipt of the demand, pay to the Facility Agent the amount demanded of it. The Facility Agent shall, upon receipt of such amount, promptly pay the same to the Issuing Bank of the relevant Letter of Credit. 5.3 Indemnification Ahold USA hereby irrevocably and unconditionally agrees to indemnify and keep indemnified the Issuing Bank, the Facility Agent and each Bank on demand against each and every sum paid or payable by the Issuing Bank or any such Bank under or in respect of any Letter of Credit and also undertakes to indemnify and hold harmless the Issuing Bank, the Facility Agent and each Bank on demand from and against all actions, proceedings, liabilities, costs (including any costs incurred in funding any amount which falls due from the Issuing Bank, the Facility Agent or any Bank under any Letter of Credit in connection with any such Letter of Credit), claims, losses, damages and expenses which the Issuing Bank, the Facility Agent and each Bank may at any time incur or sustain in connection with or arising out of any Letter of Credit. 5.4 The Issuing Bank's and Banks' Entitlements The Issuing Bank and each Bank shall be entitled to make any payment under or in respect of any Letter of Credit for which a demand has been made without any reference to or further authority from Ahold USA or any other investigation or enquiry, need not concern itself with the propriety of any demand made or purported to be made under and in the manner required by the terms of any such Letter of Credit and shall be entitled to assume that any person expressed in any Letter of Credit or in any notice served pursuant to any such Letter of Credit to be entitled to make demands is so entitled and that any individual purporting to sign any such demand or notice on behalf of such person is duly authorised to do so; accordingly, it shall not be a defence to any demand made of Ahold USA, nor shall Ahold USA's obligations hereunder be impaired by the fact (if it be the case), that the Issuing Bank, the Facility Agent or any Bank was or might have been justified in refusing payment, in whole or in part, of the amounts so demanded. 5.5 Obligations Not Discharged The obligations of each of the Banks and Ahold USA to the Issuing Bank, the Facility Agent and (in the case of Ahold USA) each Bank shall not be discharged, lessened or impaired by any act, omission or circumstance whatsoever which, but for this provision, might operate to release or exonerate such Bank or Ahold USA from all or part of such obligations or in any other way discharge, lessen or impair the same. 5.6 Certificate of the Issuing Bank Conclusive A certificate of the Issuing Bank as to the amount paid out by the Issuing Bank under any Letter of Credit shall, save for manifest error, be conclusive and binding upon Ahold USA for the purposes of this Agreement and prima facie evidence of the payment of such amounts in any legal action or proceedings arising in connection therewith. -22- 6. Letter of Credit Fees and Fronting Fee 6.1 Letter of Credit Fees Ahold USA shall, in respect of each Letter of Credit issued at its request, be obliged to pay to the Facility Agent for the account of each Bank (for distribution in proportion to each Bank's participation under the relevant Letter of Credit, a letter of credit fee at the Financial L/C Commission Rate (in the case of Financial Letter of Credit) or Non Financial L/C Commission Rate (in the case of a Non- Financial Letter of Credit) on the face amount of the relevant Letter of Credit. Such letter of credit fee shall be paid in arrears in respect of each successive period of three months (or such shorter period as shall end on the Expiry Date relating to such Letter of Credit) which begins during the Term of the relevant Letter of Credit, each payment of such letter of credit commission to be made on the last day of each such period. 6.2 Fronting Fee Ahold USA shall negotiate in good faith with any proposed Issuing Bank and agree a fee to be paid to such Issuing Bank in respect of its issuing any Letter of Credit or Existing Letter of Credit. Such fee shall be payable in arrears in respect of each successive period of three months (or such shorter period as shall end on the Expiry Date of such Letter of Credit or Existing Letter of Credit (as the case may be)) which begins during the Term of such Letter of Credit or Existing Letter of Credit (as the case may be), such fee to be payable directly to such Issuing Bank on the last day of each such period. In addition, Ahold USA shall compensate each Issuing Bank in full on demand by such Issuing Bank for all customary administrative, issuance, amendment, payment and negotiation charges incurred or chargeable by it in connection with any Letter of Credit or Existing Letter of Credit (as the case may be) issued by it. -23- PART 5 UTILISATION OF THE SWING-LINE FACILITY 7. Utilisation of the Swing-Line Facility 7.1 Delivery of Utilisation Request for Swing-Line Advances Save as otherwise provided herein, a Borrower may from time to time request the making of a Swing- Line Advance under the Swing-Line Facility by delivery by telefax to the Swing- Line Agent and the Facility Agent, not more than three business days in New York before nor later than 10.00 a.m. (New York Time) on the latest business day in New York which falls on or before the proposed date for the making of the relevant Swing-Line Advance, of a duly completed Utilisation Request. 7.2 Utilisation Details Each request made of the Swing-Line Agent pursuant to Clause 7.1 (Delivery of Utilisation Request for Swing-Line Advances) shall be irrevocable and shall specify: (a) the proposed date for the making of the relevant Swing-Line Advance, which shall be a business day in New York falling before the Termination Date; (b) the amount of the proposed Swing-Line Advance, which shall be an amount of not less than $25,000,000 and an integral multiple of $5,000,000 which is less than or equal to the Available Swing-Line Facility; (c) the proposed Term of the proposed Swing-Line Advance, which shall be a period of not more than ten business days in New York ending on a business day in New York on or before the Termination Date; and (d) the account to which the proceeds of the proposed Swing-Line Advance are to be paid. 7.3 Conditions of Utilisation If the Borrower requests a Swing-Line Advance in accordance with the preceding provisions of this Clause 7 and, on the proposed date for the making of such Swing-Line Advance: (a) the Dollar Amount of such Swing-Line Advance does not exceed the Available Swing-Line Facility; and (b) either: (i) no Event of Default or Potential Event of Default has occurred and is continuing or would result from the making of such Swing- Line Advance; and (ii) the representations set out in Clause 23 (Representation and Warranties) which are to be repeated pursuant to the relevant Utilisation Request are true on and as of the proposed date for the making of such Swing-Line Advance and would continue to be true immediately following the making of the relevant Swing-Line Advance and the application of the proceeds thereof in meeting the purpose of the making of such Swing-Line Advance (as if references therein to Original Financial Statements were references to the most recent set of annual audited financial statements delivered by each Borrower to the Facility Agent pursuant to Clause 24 (Undertakings)) -24- or each of the Swing-Line Banks agrees (notwithstanding any matter mentioned at (i) or (ii) above) to participate in the making of such Swing-Line Advance, then: (1) the Swing-Line Agent shall, no later than 1.00 p.m. (New York Time) on the proposed Utilisation Date, notify each Swing-Line Bank by telefax or by telephone (with confirmation to follow by telefax) at its Facility Office specified for the purpose of Swing-Line Advances of the amount of such Swing-Line Advance, the amount of such Swing-Line Bank's participation therein and the period for which such Swing-Line Advance is to be made; (2) each Swing-Line Bank shall, no later than 2.00 p.m. (New York Time) on such proposed Utilisation Date make its portion of such Swing-Line Advance available to the Swing-Line Agent, in dollars, in accordance with Clause 29 (Payments); and (3) the Swing-Line Agent shall, no later than 4.00 p.m. (New York Time) on such proposed Utilisation Date, make such Swing-Line Advance available to the relevant Borrower in accordance with but subject to Clause 29 (Payments). 7.4 Facility Office Each Swing-Line Bank will participate in each Swing-Line Advance made pursuant to this Clause 7 through its Facility Office specified for the purpose of Swing-Line Advances in its Relevant Amount. 7.5 Reduction of Commitment If a Bank's Swing-Line Commitment is reduced in accordance with the terms hereof after the Swing-Line Agent has received a request for a Swing-Line Advance, then the amount of that Swing-Line Advance shall be reduced accordingly. -25- PART 6 UTILISATIONS OF THE SHORT-TERM ADVANCES FACILITY 8. Request for offers 8.1 Making Requests for Offers Save as otherwise provided herein, Ahold USA may from time to time request offers by tender for the making of Short-Term Advances under the Short-Term Advances Facility by the delivery to the Short-Term Advances Agent by telex, not earlier than the eighth business day nor later than five (or if the interest rates relating to such Short-Term Advances are to be expressed on the Absolute Basis 9.30 a.m. (New York Time) two) business days before the proposed Utilisation Date relating to such Short-Term Advance, of a duly completed Utilisation Request therefor. 8.2 Request Details Each Utilisation Request delivered to the Short-Term Advances Agent pursuant to Clause 8.1 (Making Requests for Offers) shall be irrevocable and shall specify: (a) the proposed Utilisation Date, which shall be a business day falling five business days or more after the previous Utilisation Date, if any, relating to Short-Term Advances and one month or more before the Termination Date; (b) whether or not the interest rate relating to the relevant Short-Term Advances is to be determined by reference to LIBOR or expressed on the Absolute Basis; (c) the aggregate amount of the Short-Term Advances in respect of which offers are requested, which shall be an amount of not less than $10,000,000 and an integral multiple of $5,000,000 and the Dollar Amount of which is less than the Available Facility; (d) the proposed Term of the proposed Short-Term Advances which shall be a period of one, two, three, six or twelve months (if the interest rate relating to such Short-Term Advances is to be determined by reference to LIBOR) or not less than seven days or more than one hundred and eighty days (if the interest rate relating to such Short-Term Advances is to be expressed on the Absolute Basis) and, in each case, ending on a business day falling on or before the Termination Date. 8.3 Notification of Banks The Short-Term Advances Agent shall, promptly after receipt by it of a Utilisation Request and in any event no later than 2.00 p.m. (New York Time) on the fourth business day (or, in the case of Short-Term Advances the interest rate relating to which is to be expressed on the Absolute Basis 2.00 p.m. (New York Time) on the second business day) before the proposed Utilisation Date relating thereto, notify the Banks by telex of its receipt of such Utilisation Request specifying: (a) the proposed Utilisation Date; (b) the Requested Amount and Term of the proposed Short-Term Advances; and (c) whether or not the interest rate relating to the relevant Short-Term Advances is to be determined by reference to LIBOR or expressed on the Absolute Basis; and inviting each Bank to make an offer or offers to make the proposed Short- Term Advances. -26- 9. Offers for Short-Term Advances 9.1 Offers by Banks Each Bank may (but is not obliged to) make an offer or offers (not exceeding three) to make any proposed Short-Term Advances by the delivery to the Short-Term Advances Agent by telex, no later than 11.00 a.m. (New York Time) on the third business day (or, in the case of Short-Term Advances the interest rate relating to which is to be determined by reference to the Absolute Basis, 9.30 a.m. (New York Time) on the business day) before the proposed Utilisation Date relating to such Short-Term Advances, of a notice bearing such Bank's name, and the reference "Ahold USA Holdings, Inc - Short- Term Advances" and specifying: (a) the Utilisation Request in relation to which the offer or offers therein contained are made; and (b) in relation to each offer therein contained the amount of the Short- Term Advance which such Bank offers to make, which shall be not less than $5,000,000 and an integral multiple of $1,000,000; and (c) if the interest rate in relation to such Short-Term Advances is to be determined by reference to LIBOR, the margin (positive or negative and expressed as a percentage rounded up, if necessary, to four decimal places) over or under LIBOR or if the interest rate in relation to such Short-Term Advances is to be expressed by reference to the Absolute Basis, the rate of interest per annum expressed as a fixed annual percentage yield (rounded up, if necessary, and specified in increments of 1/10,000 of one per cent.) offered for each such Short- Term Advance. 9.2 Separate Offers Each offer made by a Bank pursuant to Clause 9.1 (Offers by Banks) shall be treated as a separate offer for the purposes hereof and shall be irrevocable and capable of acceptance by Ahold USA in accordance with the terms hereof. 9.3 Notification to Ahold USA The Short-Term Advances Agent shall, as soon as practicable and in any event no later than 12.30 p.m. (New York Time) on the third business day (or, in the case of Short-Term Advances the interest rate relating to which is to be expressed on the Absolute Basis, 10.15 a.m. (New York Time) on the business day) preceding the proposed Utilisation Date for any Short-Term Advances, notify Ahold USA by telex or telephone of the offers made pursuant to the Utilisation Request relating to such Short-Term Advances specifying, in respect of each offer: (a) the name of the Bank making such offer; (b) the amount of the Short-Term Advance offered; and (c) the relevant margin quote (in the case of Short-Term Advances the interest rate relating to which is to be determined by reference to LIBOR) or fixed annual percentage yield (in the case of Short-Term Advances the interest rate in relation to which is to be determined by reference to the Absolute Basis). 10. Offers by the Short-Term Advances Agent or its Affiliates Notwithstanding the provisions of Clause 9 (Offers for Short-Term Advances), any Bank which is, or is an affiliate of, the Short-Term Advances Agent may only make an offer or offers to make Short-Term Advances in response to any Utilisation Request by notifying its offer or offers to Ahold USA making such request by telex no later than 10.00 a.m. (New York Time) on the third business day (or, in the case of Short-Term Advances the interest rate relating to which is to be expressed on the Absolute Basis, 9.00 a.m. (New York Time) on the -27- business day) prior to the proposed Utilisation Date for such Short-Term Advances and any offer by such a Bank which is not so notified to Ahold USA shall be invalid and shall not be capable of acceptance by Ahold USA. 11. Acceptance of Offers 11.1 Notification by Ahold USA of Acceptances Ahold USA shall, no later than 1.30 p.m. (New York Time) on the third business day (or, in the case of Short- Term Advances the interest rate relating to which is to be determined by reference to the Absolute Basis, 11.30 a.m. (New York Time) on the business day) prior to the Utilisation Date relating to such Short-Term Advances, notify the Short-Term Advances Agent by telex or telephone whether or not it wishes to accept, in whole or in part, the offers made in response to the relevant Utilisation Request and, if so, the aggregate amount of the Short-Term Advances the offers in respect of which it wishes to accept, which shall be: (a) not less than $10,000,000 and an integral multiple of $5,000,000 and which shall be: - (i) not more than the Requested Amount specified in such Utilisation Request; and (ii) the Dollar Amount of which shall not exceed the Available Facility. 11.2 Accepted Offers Each acceptance by Ahold USA pursuant to Clause 11.1 (Notification by Ahold USA of Acceptances) of the offers made in response to a Utilisation Request shall be treated as an acceptance of such offers in ascending order of the yields (in the case of offers made by reference to LIBOR, calculated in accordance with Clause 9.1 (Offers by Bank)) at which the same were made but if, as a result thereof, two or more offers at the same yield fall to be partially accepted, then the amounts of the Short-Term Advances in respect of which such offers are accepted shall be treated as being the amounts which bear the same proportion to one another as the respective amounts of the Short- Term Advances so offered bear to one another but, in each case, rounded as the Short-Term Advances Agent may consider necessary to ensure that the amount of each Short-Term Advance is an amount of not less than $5,000,000 and an integral multiple of $1,000,000. 11.3 Notification to Banks of Accepted Offers The Short-Term Advances Agent shall, no later than 3.00 p.m. (New York Time) on the third business day (or, in the case of Short-Term Advances the interest rate in relation to which is expressed on the Absolute Basis 3.00 p.m. (New York Time) on the business day) prior to the Utilisation Date relating to the relevant Short-Term Advances, notify by telex each Bank which has made an offer in response to such Utilisation Request whether or not such offer has been accepted in whole or in part and, if so, the amount of the Short-Term Advance in respect of which such offer has been accepted and the yield relating thereto. 12. Making of Short-Term Advances If the Short-Term Advances Agent notifies any Bank in accordance with Clause 11.3 (Notification to Banks of Accepted Offers) of Ahold USA's acceptance, in whole or in part, of any offer by such Bank to make any Short- Term Advance and on the proposed Utilisation Date relating to such Short-Term Advance: (i) if the interest rate in respect of such Short-Term Advance is to be determined by reference to LIBOR, neither of the events mentioned in Clause 22 (Market Disruption) shall have occurred; (ii) the Dollar Amount of such Short-Term Advance does not exceed the Available Facility; and -28- (iii) either: (a) no Event of Default or Potential Event of Default has occurred and is continuing or would result from the making of such Short- Term Advance; and (b) the representations set out in Clause 23 (Representations and Warranties) which are to be repeated pursuant to the relevant Utilisation Request are true on and as of the proposed date for the making of such Short-Term Advance and would continue to be true immediately following the making of the relevant Short-Term Advance and the application of the proceeds of thereof in meeting the purpose of such Short-Term Advance (as if references therein to Original Financial Statements were references to the most recent set of annual audited financial statements delivered by each Borrower to the Facility Agent pursuant to Clause 24 (Undertakings)), or the respective Bank agrees (notwithstanding any matter mentioned in (a) and (b) above) to participate in the making of such Short-Term Advance, then, on such Utilisation Date, such Bank shall make such Short-Term Advance through its Facility Office to Ahold USA in accordance with Clause 29 (Payments). -29- PART 7 INTEREST 13. Interest on Revolving Credit Advances 13.1 Rate of Interest The rate of interest applicable to a Revolving Credit Advance during the Term of such Revolving Credit Advance shall be the rate per annum determined by the Facility Agent to be the sum of LIBOR relating to such Revolving Credit Advance and the Margin at such time. 13.2 Notification The Facility Agent shall promptly notify the relevant Borrower and each Bank of each determination made by it pursuant to this Clause 13. 13.3 Payment of Interest On the Repayment Date relating to each Revolving Credit Advance (and if such Revolving Credit Advance has a Term which exceeds six months, at the end of each successive six monthly period of such Term) the relevant Borrower shall pay accrued interest on that Revolving Credit Advance. 14. Interest on Swing-Line Advances 14.1 Rate of Interest The rate of interest applicable to a Swing-Line Advance on each day (a "relevant day") during the Term of such Swing-Line Advance shall be the rate per annum determined by the Swing-Line Agent as at 11.00 a.m. (New York Time) on the relevant day to be the greater of: (i) the Prime Rate for such relevant day; and (ii) the sum of the Federal Funds Rate for such relevant day and the Swing- Line Margin at such time. 14.2 Notification The Swing-Line Agent shall promptly notify the relevant Borrower and each Swing-Line Bank of each determination made by it pursuant to Clause 14.1 (Rate of Interest). 14.3 Payment of Interest On the Repayment Date relating to each Swing-Line Advance the relevant Borrower shall pay accrued interest on that Swing-Line Advance. 15. Interest on Short-Term Advances 15.1 Rate of Interest The rate of interest applicable to a Short-Term Advance during the Term of such Short-Term Advance shall be: (i) (if the interest rate relating to such Short-Term Advance is to be determined by reference to LIBOR) the rate per annum determined by the Facility Agent to be the sum of LIBOR relating to such Short-Term Advance and the margin at which such Short-Term Advance was offered or, if such margin was negative, the difference between such margin (taking such margin as a positive number for such purpose) and LIBOR relating to such Short-Term Advance; or (ii) (if the interest rate relating to such Short-Term Advance is expressed on the Absolute Basis) the fixed annual percentage yield at which such Short-Term Advance was offered. 15.2 Payment of Interest On the Repayment Date relating to each Short-Term Advance (and if such Short-Term Advance has a Term which exceeds six months, at the end of each successive six monthly period of such Term) the relevant Borrower shall pay accrued interest on that Short-Term Advance. -30- PART 8 REPAYMENT AND CANCELLATION 16. Repayment of Advances 16.1 Repayment Each Borrower shall repay each Advance made to it in full on the Repayment Date relating thereto. 16.2 Prepayment A Borrower may, subject to Clause 27.5 (Broken Periods), if it gives to the Facility Agent not less than fifteen days' prior written notice to that effect, prepay the whole of any Advance. Any notice of prepayment shall be irrevocable, shall specify the date upon which such prepayment is to be made and the amount of such prepayment and shall oblige such Borrower to make such prepayment on such date. 16.3 Mandatory Payment If any Bank claims indemnification from a Borrower under Clause 18 (Taxes) or Clause 20 (Increased Costs) and within thirty days thereafter the Facility Agent receives from such Borrower at least ten days' prior written notice (which shall be irrevocable) of such Borrower's intention to repay such Bank's share of any Advance, the Borrower shall, subject to Clause 27.5 (Broken Periods), repay such Bank's portion of such Advance. 16.4 Reduction of Commitments A Bank for whose account a repayment is to be made under Clause 16.3 (Mandatory Repayment) shall not be obliged to make any Advances hereunder on or after the date upon which the Facility Agent receives a Borrower's notice of its intention to repay such Bank's share of any Advance, on which date such Bank's Available Commitment (and hence its Swing-Line Commitment and Letter of Credit Commitment) shall be reduced to zero. 16.5 Repayment Method None of the Borrowers shall repay all or any part of any Advance outstanding hereunder except at the times and in the manner expressly provided herein but shall, save as provided herein, be entitled to reborrow any amount repaid. 17. Cancellation 17.1 Cancellation The Principal Company may, by giving to the Facility Agent not less than ten days' prior written notice to that effect, cancel the whole or any part (being an amount of not less than $25,000,000 and an integral multiple of $5,000,000) of the Total Commitments. Any such cancellation shall reduce the Commitment of each Bank rateably. 17.2 Irrevocable Instruction Any notice of cancellation given by the Principal Company pursuant to Clause 17.1 (Cancellation) shall be irrevocable and shall specify the date upon which such cancellation is to be made and the amount of such cancellation. 17.3 Notice The Facility Agent shall promptly notify each of the other Agents and the Banks of any notice of cancellation received by it from the Borrower pursuant to Clause 17.1 (Cancellation). 17.4 Cancellation of Commitment If any Bank claims indemnification from the Principal Company under Clause 18 (Taxes) or Clause 20 (Increased Costs), the Principal Company may, whilst the relevant circumstances continue and by not less than ten days' prior written notice to the Facility Agent (which notice shall be irrevocable), cancel such Bank's Commitment whereupon such Bank shall cease to be obliged to make Advances and its Commitment (and thereby its Swing- Line Commitment and its Letter of Credit Commitment, if any) shall be reduced to zero. -31- PART 9 RISK ALLOCATION 18. Taxes 18.1 Tax Gross-Up All payments to be made by any Obligor to any person hereunder shall be made free and clear of and without deduction for or on account of tax unless such Obligor is required to make such a payment subject to the deduction or withholding of tax, in which case the sum payable by such Obligor in respect of which such deduction or withholding is required to be made shall be increased to the extent necessary to ensure that, after the making of the required deduction or withholding, such person receives and retains (free from any liability in respect of any such deduction or withholding) a net sum equal to the sum which it would have received and so retained had no such deduction or withholding been made or required to be made. 18.2 Tax Indemnity Without prejudice to the provisions of Clause 18.1 (Tax Gross-Up), if any person or an Agent on its behalf is required to make any payment on account of tax or otherwise (not being a tax imposed on the net income of any Facility Office by the jurisdiction in which it is incorporated or in which such Facility Office is located) on or in relation to any sum received or receivable hereunder by such person or an Agent on its behalf (including, without limitation, any sum received or receivable under this Clause 18) or any liability in respect of any such payment is asserted, imposed, levied or assessed against such person or an Agent on its behalf, the Principal Company shall, upon demand of the relevant Agent, promptly indemnify such person against such payment or liability, together with any interest, penalties and expenses payable or incurred in connection therewith. 18.3 Claims by Banks Any person intending to make a demand pursuant to Clause 18.2 (Tax Indemnity) shall notify the Principal Company (through the Facility Agent in the case of a Bank) in reasonable detail of the event by reason of which it is entitled to do so Provided that nothing herein shall require such person to disclose any confidential information relating to the organisation of its affairs. 18.4 U.S. Withholding Taxes Each Bank and Agent that is not incorporated under the laws of the United States of America or a state thereof which is or will be a lender to Ahold USA agrees that it will deliver to Ahold USA and the Facility Agent two duly completed copies of United States Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the case may be. Each such Bank and Agent also agrees to deliver to Ahold USA and the Facility Agent two further copies of said Form 1001 or 4224 or successor applicable forms or other manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to Ahold USA and the Facility Agent and such extensions or renewals thereof as may reasonably be requested by Ahold USA or the Facility Agent, unless in any such case an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Bank or Agent from duly completing and delivering any such form with respect to it and such Bank or Agent so advises Ahold USA and (in the case of any Bank) the Facility Agent. Each such Bank and Agent shall certify that it is entitled to receive payments from Ahold USA under this Agreement without deduction or withholding of any United States federal income taxes. 19. Tax Receipts 19.1 Notification of Requirement to Deduct Tax If, at any time, any Obligor is required by law to make any deduction or withholding from any sum payable by it hereunder (or if thereafter there is any change in the rates at which or the manner in which such deductions or withholdings are calculated), such Obligor shall promptly notify the Facility Agent upon becoming aware of the same. -32- 19.2 Evidence of Payment of Tax If any Obligor makes any payment hereunder in respect of which it is required to make any deduction or withholding, it shall pay the full amount required to be deducted or withheld to the relevant taxation or other authority within the time allowed for such payment under applicable law and shall deliver to the Facility Agent for each Bank, within thirty days after it has made such payment to the applicable authority, an original receipt (or a certified copy thereof) issued by such authority (if any) or other written evidence of payment as such Obligor can provide evidencing the payment to such authority of all amounts so required to be deducted or withheld in respect of that Bank's share of such payment. 20. Increased Costs 20.1 Increased Costs If, by reason of (i) any change in law or in its interpretation or administration and/or (ii) compliance with any request from or requirement of any central bank or other fiscal, monetary or other authority (including, without limitation, a request or requirement which affects the manner in which a Bank or any holding company of such Bank is required to or does maintain capital resources having regard to such Bank's obligations hereunder and to amounts owing to it hereunder): (a) a Bank or any holding company of such Bank incurs a cost as a result of such Bank's having entered into and/or performing its obligations under this Agreement and/or assuming or maintaining a commitment or performing its obligations (including its obligation to make Advances or participate in, or make a payment under, a Letter of Credit) under this Agreement and/or its participating in or making one or more Advances or the issuing of or participation in one or more Letters of Credit; (b) a Bank or any holding company of such Bank is unable to obtain the rate of return on its overall capital which it would have been able to obtain but for such Bank's having entered into and/or performing its obligations and/or assuming or maintaining a commitment under this Agreement; (c) there is any increase in the cost to a Bank or any holding company of such Bank of funding or maintaining all or any of the advances comprised in a class of advances formed by or including the Advances or payments in respect of Letters of Credit made or to be made by such Bank hereunder; or (d) a Bank or any holding company of such Bank becomes liable to make any payment on account of tax or otherwise (not being a tax imposed on the net income of such holding company or any Facility Office of such Bank by the jurisdiction in which it is incorporated or in which such Facility Office is located) on or calculated by reference to the amount of the Advances made or to be made by such Bank hereunder or Letters of Credit issued or to be issued hereunder or its participation therein and/or to any sum received or receivable by it hereunder, then the Principal Company shall, from time to time on demand of the Facility Agent, promptly pay to the Facility Agent for the account of that Bank amounts sufficient to indemnify that Bank or any such holding company against, as the case may be, (1) such cost, (2) such reduction in such rate of return (or such proportion of such reduction as is, in the opinion of that Bank, attributable to its obligations hereunder), (3) such increased cost (or such proportion of such increased cost as is, in the opinion of that Bank, attributable to its funding or maintaining Advances or payments in respect of Letters of Credit) or (4) such liability. -33- 20.2 Increased Cost Claims A Bank intending to make a claim pursuant to Clause 20.1 (Increased Costs) shall notify the Facility Agent in reasonable detail of the event by reason of which it is entitled to do so, whereupon the Facility Agent shall notify the Principal Company thereof Provided that nothing herein shall require such Bank to disclose any confidential information relating to the organisation of its affairs. 20.3 Exclusion of Swing-Line For the purposes of this Clause 20 "Bank" does not include any Bank in its capacity as a Swing-Line Bank and "Advances" does not include Swing-Line Advances. 20.4 Illegality If, at any time, it is unlawful for a Bank to make, fund or allow to remain outstanding all or any of the Advances made or to be made by it hereunder or to participate in the issue of, or to allow to remain outstanding all or any of its liabilities under, any of the Letters of Credit, then that Bank shall, promptly after becoming aware of the same, deliver to the Principal Company through the Facility Agent a notice to that effect and: (a) such Bank shall not thereafter be obliged to make any Advances or to participate in the issue of any Letters of Credit or the Swing-Line Facility and the amount of its Commitment shall be immediately reduced to zero; and (b) if the Facility Agent on behalf of such Bank so requires, the Principal Company shall procure that the relevant Borrower or Borrowers shall on such date as the Facility Agent shall have specified: (i) repay each outstanding Advance together with accrued interest thereon and all other amounts owing to such Bank; and/or (ii) procure that such Bank's obligations under any Letters of Credit will be reduced to zero or otherwise secured with 100% cash security (in the currency in which such Letter of Credit is denominated) in a manner acceptable to such Bank. 20.5 Regulation D Costs Each relevant Borrower shall, within seven days of demand by any Bank (through the Facility Agent), pay to that Bank the amount of any Regulation D Costs actually incurred by that Bank in respect of any Advance made by it to that Borrower. Any such demand shall contain reasonable details of the calculation of the relevant Regulation D Costs. 21. Mitigation If, in respect of any Bank, circumstances arise which would or would upon the giving of notice result in: (a) the reduction of its Commitment (and thereby its Swing-Line Commitment and its Letter of Credit Commitment, if any) to zero pursuant to Clause 20.4(a) (Illegality); (b) an increase in the amount of any payment to be made to it or for its account pursuant to Clause 18.1 (Tax Gross-Up); or (c) a claim for indemnification pursuant to Clause 18.2 (Tax Indemnity) or Clause 20.1 (Increased Costs), then, without in any way limiting, reducing or otherwise qualifying the rights of such Bank or the obligations of any Borrower under any of the Clauses referred to in (a), (b) or (c) above such Bank shall promptly upon becoming aware of the same notify the Facility Agent thereof and, in consultation with the Facility Agent and the -34- Borrower and to the extent that it can do so without prejudice to its own position, take reasonable steps to mitigate the effects of such circumstances including the transfer of its Facility Office Provided that such Bank shall be under no obligation to take any such action if, in the opinion of such Bank, to do so might have any material adverse effect upon its business, operations or financial condition. 22. Market Disruption If, in relation to any Revolving Credit Advance or Short-Term Advance the interest rate in relation to which is to be determined by reference to LIBOR: (a) the Facility Agent determines that at 11.00 a.m. on the Quotation Date for such Revolving Credit Advance or Short-Term Advance (i) there is no screen rate quote for LIBOR and (ii) none or only one of the Reference Banks was offering to prime banks in the London Interbank Market deposits in the currency requested for such Revolving Credit Advance or Short-Term Advance for the proposed duration of the Term thereof; or (b) before the close of business in London on the Quotation Date for such Term the Facility Agent has been notified by a Bank or each of a group of Banks to whom in aggregate thirty-five per cent. or more of the Dollar Amount of the Outstandings is (or, if such Revolving Credit Advance or Short-Term Advance were then made, would be) owed that the rate at which such deposits were being so offered does not accurately reflect the cost to it of obtaining such deposits, then, notwithstanding the provisions of Clause 13 (Interest on Revolving Credit Advances) or 15 (Interest on Short-Term Advances): (i) the Facility Agent shall notify the other parties hereto of such event; (ii) such Revolving Credit Advance or Short-Term Advance shall not be made; and (iii) if the Facility Agent so requires, within five days of such notification the Facility Agent and the Principal Company shall enter into negotiations in good faith with a view to agreeing a substitute basis for determining the rates of interest which may be applicable to Revolving Credit Advances or Short-Term Advance in the future and any such substitute basis that is agreed shall take effect in accordance with its terms and be binding on each party hereto Provided that the Facility Agent may not agree any such substitute basis without the prior consent of each Bank. -35- PART 10 REPRESENTATIONS, WARRANTIES, UNDERTAKINGS AND EVENTS OF DEFAULT 23. Representations and Warranties Each Obligor represents and warrants to the Agents and each of the Banks that: (i) (in the case of the Principal Company) it is a public company with limited liability ("naamloze vennootschap") duly incorporated and validly existing under the laws of The Netherlands, (in the case of Ahold USA) it is a corporation duly organised and in good standing under the laws of the State of Delaware and the United States of America and (in the case of any Additional Borrower) it is a corporation duly organised and in good standing under the laws of its jurisdiction of incorporation and has the corporate power to own its property and assets and to carry on its business as it is now being conducted; (ii) it has the corporate power to enter into and perform the Finance Documents to which it is expressed to be a party and the transactions contemplated thereby and to borrow and to undertake obligations in respect of Letters of Credit hereunder and has taken all necessary actions to authorise the borrowing of Advances and the undertaking of obligations in respect of Letters of Credit upon the terms and conditions of this Agreement and to authorise the execution, delivery and performance of the Finance Documents to which it is expressed to be a party in accordance with their respective terms; (iii) each of the Finance Documents to which it is expressed to be a party constitutes and will at all times constitute its legal, valid and binding obligations, enforceable in accordance with its terms; (iv) its indebtedness under this Agreement is its direct, unconditional and general indebtedness and ranks, and will at all times rank, pari passu with all other unsecured indebtedness and liabilities (actual or contingent) (with the exception of any indebtedness and liabilities preferred by law and deferred or subordinated indebtedness) issued, created or assumed now or in the future or for which it is now or may at any time in the future otherwise be or become responsible; (v) its Original Financial Statements (copies of which have been provided to each of the Banks) were prepared in accordance with accounting principles generally accepted in The Netherlands (in the case of the Principal Company) and its jurisdiction of incorporation and The Netherlands (in the case of any Additional Borrower) and fairly present its condition and (in the case of the Principal Company) that of the Group, at such date and its results and (in the case of the Principal Company) the results of the Group for such year; there has been no material adverse change in its financial position or in the financial position of the Group or in the financial position of Ahold USA and its subsidiaries, taken as a whole, since that date which might have a material adverse effect on any Obligor's ability to perform its obligations under any of the Finance Documents to which it is expressed to be a party, and such accounts included all significant liabilities (including contingent liabilities); (vi) since the date on which its Original Financial Statements were prepared there has been no material adverse change in its (or, in the case of the Principal Company, the Group's, or, in the case of Ahold USA, Ahold USA and its subsidiaries) financial or trading condition or prospects which could have a material adverse effect on its ability to perform or comply with its obligations under this Agreement; -36- (vii) no Event of Default or Potential Event of Default has occurred and is continuing unremedied, nor will any Event of Default or Potential Events of Default result from the making of any Advance or issue of or participation by a Bank in any Letter of Credit hereunder; (viii) its execution, delivery and performance of the Finance Documents to which it is expressed to be a party and the borrowing of Advances and the undertaking of obligations in respect of Letters of Credit do not and will not violate in any respect any provisions of (i) any applicable law or judgement of The Netherlands, its jurisdiction of incorporation or any other relevant jurisdiction, or (ii) any mortgage contract other undertaking or instrument to which it is a party or which is binding upon it or any of its assets and does not and will not result in the creation or imposition of any encumbrance on any of its assets pursuant to the provisions of any such mortgage, contract or other undertaking or instrument; (ix) no litigation, arbitration or administrative proceedings are presently current or pending or, to the best of its knowledge threatened, which would or might have a material adverse effect on its ability to perform its obligations under this Agreement; (x) all acts, conditions and things required to be done, fulfilled and performed in order (a) to enable it lawfully to enter into, exercise its rights under and perform and comply with the obligations expressed to be assumed by it in the Finance Documents to which it is expressed to be party, (b) to ensure that the obligations expressed to be assumed by it in the Finance Documents to which it is expressed to be party are legal, valid and binding and (c) to make the Finance Documents to which it is expressed to be party admissible in evidence in its jurisdiction of incorporation have been done, fulfilled and performed; (xi) no member of the Group is in breach of or in default under any agreement in respect of borrowed money which exceeds $25,000,000 (or its equivalent) (save, in respect of any guarantees, where liability under such guarantee is being contested by an Obligor or Material Subsidiary in good faith) to which it is a party or which is binding on it or any of its assets; (xii) all of the written information supplied by it to the Agents, the Arrangers and the Banks in connection herewith is true, complete and accurate in all material respects and it is not aware of any material facts or circumstances that have not been disclosed to the Agents, the Arrangers and the Banks and which might, if disclosed, adversely affect the decision of a person considering whether or not to provide finance to it; (xiii) neither it nor (in the case of the Principal Company and Ahold USA) any of its subsidiaries has taken any corporate action nor have any other steps been taken or legal proceedings been started or (to the best of its knowledge and belief) threatened against it or (in the case of the Principal Company and Ahold USA) any of its subsidiaries for its winding-up, dissolution, administration or re- organisation or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of it or of any or all of its assets or revenues; (xiv) it is conducting its business and operations in compliance with all laws and regulations and all directives of governmental authorities having the force of law applicable or relevant to it; (xv) it owns and has good and marketable title to all of its property; -37- (xvi) to the best of its knowledge, it is in compliance with all Environmental Laws and it has obtained, and will at all times obtain, and is in compliance with, all Environmental Permits; (xvii) to the best of its knowledge, there are no circumstances which have led, or could lead, to a competent authority or a third party taking any action or making a claim under any Environmental Laws including the requirement to clean up any contaminated land or the revocation, suspension, variation or non-renewal of any Environmental Permits or to any member of the Group having to take action to avert the possibility of any such action or claim; (xviii) the aggregate liabilities of each Obligor and the ERISA Affiliates to all Multiemployer Plans in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Multiemployer Plan ended prior to the date hereof, would not have a material adverse effect upon the financial condition of such Obligor; each Employee Plan is in compliance in all material respects in form and operation with ERISA and the Code; except as disclosed, each Employee Plan which is intended to be qualified under Section 401(a) of the Code has been determined by the IRS to be so qualified as to form, and, to the knowledge of any Obligor, nothing has occurred since the date of such determination that would adversely affect such determination; the fair market value of the assets of each Employee Plan subject to Title IV of ERISA is at least equal to the present value of the "benefit liabilities" (within the meaning of Section 4001(a)(16) of ERISA) under such Employee Plan determined using the actuarial assumptions and method used by the actuary to such Employee Plan in its most recent valuation of such Employee Plan; there are no actions, suits or claims pending against or with respect to an Employee Plan (other than routine claims for benefits) which would cause the Obligor to incur a material liability or to the knowledge of any Obligor, which could reasonably be expected to be asserted against or with respect to any Employee Plan which would cause the Obligor to incur a material liability; each of the Obligors and the ERISA Affiliates has made all material contributions to or under each such Employee Plan, or any contract or agreement requiring contribution to an Employee Plan; none of the Obligors or any ERISA Affiliate has ceased operations at a facility so as to become subject to the provisions of Section 4062(e) of ERISA, withdrawn as a substantial employer so as to become subject to the provisions of Section 4063 of ERISA or ceased making contributions to any Plan subject to Section 4064(a) of ERISA to which it made contributions each in a manner which would cause such Obligor to incur a material liability; and none of the Obligors nor any of the ERISA Affiliates has incurred or reasonably expects to incur any material liability to PBGC other than for premiums under Section 4007 of ERISA; (xix) The borrowings made hereunder will not violate or give rise to a violation of Regulation U or Regulation X. No member of the Group or any agent acting on their behalf has taken or will take any action which would cause this Agreement or any of the documents or instruments delivered pursuant hereto, any borrowing hereunder or use of proceeds thereof to violate any regulation of the Board of Governors of the Federal Reserve System of the United States or to violate the US Securities Exchange Act of 1934 or any applicable US federal or state securities laws; and (xx) no member of the Group is subject to regulation under the United States Public Utility Holding Company Act of 1935, the United States Federal Power Act or the United States Investment Company Act of 1940 or to any United States federal or state statute or regulation limiting its ability to incur indebtedness; no member of the Group is an "investment company," or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," -38- as such terms are defined in the U.S. Investment Company Act of 1940 (15 U.S.C. (S)(S) 80a-1. et seq.); and none of the transactions contemplated by this Agreement will violate such Act. 24. Undertakings Each of the Borrowers (unless otherwise specified) undertakes that from and after the date hereof and until all sums due and to become due from such Borrower under this Agreement have been paid or repaid and the Facilities shall no longer exist: (i) (a) the Principal Company will deliver to the Facility Agent and each of the Banks as soon as the same are available (and in any event no later than 180 days after the end of the relevant financial year) its audited consolidated (and unconsolidated to the extent that any Bank shall have to comply with any regulations imposed on it in relation to the provision of financial information by the Principal Company) profit and loss account for such financial year and its audited consolidated (and unconsolidated to the extent that any Bank shall have to comply with any regulations imposed on it in relation to the provision of financial information by the Principal Company) balance sheet as at the end of such financial year prepared in conformity with generally accepted accounting principles in The Netherlands applied on a basis consistent with those of the preceding financial year, or if not prepared on a consistent basis, containing or accompanied by an adequate explanation of the consequences of any such inconsistency; (b) the Principal Company will promptly send to the Facility Agent and each of the Banks two copies of any interim report or accounts or any other notice or communication sent by it to its shareholders in their capacity as such or to any stock exchange on which its shares are listed; (c) it will forthwith upon a request to that effect, provide the Facility Agent with such additional financial information or other information as the Facility Agent or any Bank through the Facility Agent may from time to time reasonably require (including, without limitation, information that the Facility Agent or any Bank may reasonably require in order to determine the ratios referred to in Clause 24(vii) in respect of any financial period) and upon receipt of a written request to that effect from the Facility Agent, confirm to the Facility Agent that, save as previously notified to the Facility Agent or as notified in such confirmation, no Event of Default or Potential Event of Default has occurred; (d) it will annually as soon as possible after the end of its financial year (but in no event later than 90 days after the end of the relevant financial year) furnish the Facility Agent with a certificate to the effect that the representations and warranties set out in Clause 23 (Representations and Warranties) hereof are true and accurate on and as of that time as if made at that time; (e) without prejudice to Clause 24(i)(b), the Principal Company will as soon as possible after the end of each quarter of each financial year (but in no event later than 90 days after the end of the relevant quarter of such financial year) furnish the Facility Agent in sufficient copies for the Banks with its interim report in respect of such financial quarter, such interim report to contain such information as may be required to enable the Facility Agent and the Banks to calculate the ratios contained in Clause 24(vii) as at -39- or during the four quarter period ending on (as the case may be) the last day of the relevant quarter of such financial year and a duly signed certificate by one of its duly authorised officers stating that the covenants set out in Clause 24(vii) were complied with during the four quarter period ending at the end of such quarter; (ii) it will promptly give written notice to the Facility Agent of any Event of Default and of any Potential Event of Default or of the occurrence of any such event in relation to a subsidiary as if the references to Borrower in Clause 25 (Events of Default) were references to a subsidiary and if, in such latter case, such event could have a material adverse affect on the ability of any Borrower to perform its obligations under this Agreement, at the same time informing the Facility Agent of any action taken or proposed to be taken by such Borrower in connection therewith; (iii) it will not without the Banks' prior written consent create or permit to be created or to subsist and will ensure that none of its subsidiaries will without the Banks' prior written consent create or permit to be created or to subsist any encumbrance on or over the whole or any part of its assets (present or future); Provided that (x) the foregoing shall not prohibit any encumbrances upon any Margin Stock; and (y) the Banks hereby consent to (i) encumbrances to secure indebtedness for borrowed money to be created or to subsist over assets and revenues not in excess of 15% of the total consolidated net assets of the Group according to the audited consolidated financial statements of the Group most recently delivered to the Facility Agent pursuant to Clause 24(i)(a), and (ii) encumbrances created or consented to by any member of the Group prior to the date of this Agreement Provided that the Principal Company has notified the Facility Agent in writing of such encumbrances providing to the Facility Agent full details thereof, such notice to be received by the Facility Agent not later than the date hereof; (iv) it will, if the consent (other than the consent granted pursuant to sub-clause (iii)) of the Banks is required pursuant to sub-clause (iii) above and such consent is forthcoming in relation to any encumbrance, create to the satisfaction of the Banks in favour of the Banks (or the Facility Agent on behalf of the Banks) the same encumbrance or such other encumbrance or encumbrances as the Banks in their absolute discretion shall deem not materially less beneficial to them than the encumbrance in respect of which such consent is given to secure, in each case, all sums due and to become due from any Obligor under this Agreement Provided that the foregoing shall not apply to any Margin Stock; (v) it will forthwith notify the Facility Agent of any litigation or administrative or arbitration proceedings in or by any court, tribunal, arbitrator or governmental or municipal authority in process, pending or threatened against any member of the Group or any of their respective assets which might have a material adverse effect on the ability of an Obligor to perform its obligations under this Agreement; (vi) it will use its best endeavours to obtain and maintain all authorisations, approvals, consents, licenses and exemptions and it will make all necessary filings and registrations as may be required under any applicable law or regulation to enable it to perform its obligations under each Finance Document, or required for the validity or enforceability of each Finance Document and will comply with the terms of the same; and (vii) the Principal Company will ensure at all times the consolidated financial condition of the Group, as evidenced by the Principal Company's most recent audited annual consolidated financial -40- statements (adjusted to take account of any changes in circumstances which occur after the date as of which such audited annual consolidated financial statements were prepared), shall be such that the ratio of operating earnings before income taxes plus Net Interest Expense to Net Interest Expense determined on a rolling four quarter average basis is not less than 3.00:1.00. The expressions used in this Clause 24(vii) shall have the meaning attributed thereto in the consolidated financial statements of the Group (which shall comply with Clause 24(i) and shall be construed in accordance with generally accepted accounting principles in the Netherlands) but so that "Net Interest Expense" shall equal interest expense minus interest income. Finally, "determined on a rolling four quarter average basis", means in relation to the ratio referred to above, such ratio tested at the end of each Quarterly Financial Period by taking the average of such ratios calculated for each of such Quarterly Financial Period and the three immediately preceding Quarterly Financial Periods where "Quarterly Financial Period" means a financial quarter of a financial year of the Principal Company; (viii) procure that each member of the Group maintains insurances on and in relation to its business and assets with reputable underwriters or insurance companies against such risks and to such extent as is usual for companies carrying on a business such as that carried on by such member of the Group whose practice is not to self insure; (ix) it shall ensure that each of its subsidiaries shall comply with all Environmental Laws and Environmental Permits applicable from time to time to all or any part of its business or assets; (x) it shall ensure that each of its subsidiaries shall not allow any circumstances to arise which could lead to a competent authority or a third party taking action or making a claim under any Environmental Laws including the requirement to clean up any contaminated land or the revocation, suspension, variation or non- renewal of any Environmental Permits or to it or any such subsidiary having to take action to avert the possibility of any such action or claim; (xi) within four days of the receipt of notice of the same, give full particulars (and if requested a copy of any written particulars received by the relevant member of the Group) to the Facility Agent of any material notice, order, direction, designation, resolution or proposal having application to all or any part of the its business or assets or that of any of its subsidiaries or to the area in which such business or assets are situate given or made by any planning authority or other public body or authority whatsoever under or by virtue of Environmental Laws or any other statutory power whatsoever or in pursuance of the powers conferred by any other statute whatsoever; (xii) if so required by the Facility Agent, without delay and at the cost of the Principal Company, take all reasonable or necessary steps to comply with any such notice or order referred to in Clause 24(xi) above and at the request of any Bank, without delay and at the cost of the Principal Company, make or join with the Facility Agent in making such objection or objections or representations against or in respect of any proposal for such a notice or order as the Facility Agent shall deem expedient; and (xiii) nothing contained in this Agreement shall restrict the ability of the Borrower or any of its subsidiaries from selling, pledging or otherwise disposing of any assets which, at the time -41- in question, constitute Margin Stock, or cause or enable any one or more Banks to cause any or all of the Advances or other obligations to become due and payable or to enable any one or more of the Banks to take any of the actions specified in Clause 25.1(a), (b) or (c) below as a result of any such sale, pledge or disposition. 25. Events of Default 25.1 Events of Default If: (i) any Obligor fails to pay any principal, interest or other sum on the day of the same becoming due and payable pursuant to this Agreement; (ii) any representation, warranty or statement made or (deemed to be) repeated by any Obligor in this Agreement or in any certificate, statement, opinion or other document contemplated hereby proves to be untrue or incorrect in a respect which is, in the opinion of an Instructing Group, material at the time such certificate statement, opinion or document is made or repeated (or deemed to be made or repeated) or expressed; or (iii) any Obligor defaults in the due performance or observance of any undertaking or obligation on its part contained in or pursuant to this Agreement and, if such default is capable of remedy, the same shall not have been remedied to the satisfaction of the Facility Agent (after consultation with an Instructing Group,) within fourteen days thereafter; or (iv) there shall have occurred the liquidation of any of the Obligors or any Material Subsidiary or any order is made or resolution, law or regulation passed or other action taken (including the making of any application to any court or other relevant authority) for or with a view to the liquidation of any Obligor or any Material Subsidiary or any Obligor or any Material Subsidiary shall otherwise enter into liquidation; or (v) any Obligor or any Material Subsidiary petitions or applies to any court, tribunal or other body or authority for the appointment of, or there shall otherwise be appointed, any administrator, bewindvoerder, receiver, liquidator, curator, sequestrator, trustee or other similar officer of any Obligor or any Material Subsidiary or of all or any part of the assets of any Obligor or any Material Subsidiary; or (vi) any Obligor or any Material Subsidiary applies for a (temporary) moratorium or suspension of payments or for an arrangement with its creditors or for any proceedings or arrangement by which the assets of any Obligor or any Material Subsidiary are submitted to the control of its creditors or any Obligor or any Material Subsidiary otherwise threatens, proposes or declares any moratorium on its debts or any class of its debts; or (vii) any Obligor or any Material Subsidiary becomes, or is declared by any competent authority to be, insolvent or admits in writing its inability to pay its debts as they fall due or is or becomes subject to or applies for any bankruptcy proceedings or starts negotiations with its creditors for a restructuring of its debt; or (viii) any Obligor without the written consent of the Facility Agent on behalf of the Banks ceases or threatens to cease its business as presently conducted or if any Obligor or any other member of the Group sells, leases, transfers or otherwise disposes of the whole or any Substantial part of -42- its assets (other than Margin Stock) exceeding a value equalling a Substantial part of the assets on a consolidated basis of the Principal Company whether by one transaction or a series of related transactions without the prior written consent of the Banks; or (ix) any other indebtedness of any Obligor or any Material Subsidiary for or in respect of any borrowed moneys which, when aggregated with the amount of all other borrowed monies to which this Clause 25.1(ix) applies, exceed $25,000,000 (or its equivalent) (save, in respect of any guarantee, where liability under such guarantee is being contested by such Obligor or any Material Subsidiary in good faith) is not paid when due for payment (or within any stated applicable period of grace) or is found not to have been so paid or becomes due and payable or capable of being declared due and payable prior to its stated date of payment or, if payable on demand, shall not be paid when demanded Provided that if such other indebtedness is held by any Bank (or any affiliate thereof) and was declared to be due and payable or became capable of being declared due and payable prior to its stated date of payment, in any case, in circumstances which would not have occurred but for a default by either of the Borrowers or one or more of its subsidiaries in complying with a restriction contained in the documentation governing such indebtedness on the ability of such Borrower or such subsidiary to sell, pledge or otherwise dispose of Margin Stock, then neither such declaration (or any failure to pay based on any such declaration) or such becoming capable of being declared due and payable shall constitute a Potential Event of Default or Event of Default; or (x) any Obligor or any Material Subsidiary defaults under any mortgage, charge, pledge, lien or other encumbrance or other security interest upon the whole or any part of the assets of such Obligor or any Material Subsidiary and the same accordingly becomes enforceable; or (xi) all or any Substantial part of the assets of any Obligor or any Material Subsidiary are attached or distrained upon or becomes subject to any order or court or other process for execution and such attachment, distraint, order or process remains in effect and not discharged for 30 days; or (xii) any consent of the Dutch authorities or the authorities of any other relevant jurisdiction required for the validity, enforceability or legality of this Agreement or the performance thereof ceases to be or is not for any reason in full force and effect or such performance becomes unlawful; or (xiii) the whole or any part of the assets, revenues or share capital of any Obligor or any Material Subsidiary having a value which, when aggregated with the value of all other assets to which this Clause 25.1(xiii) applies, equals or exceeds 15% of the consolidated net assets of the Principal Company, is expropriated or nationalised by any government; or (xiv) any US Obligor shall (i) file a petition to take advantage of any insolvency act; (ii) file a petition or answer seeking reorganisation or arrangement or similar relief under the Federal Bankruptcy Code or any other applicable law or statute of the United States or any state; or (iii) by appropriate proceedings of the board of directors, or the general or limited partners or other governing body of any US Obligor, authorize the filing of any such petition, making of such assignment or commencement of such a proceeding; or (xv) in respect of any US Obligor a court of competent jurisdiction shall enter an order, judgment or decree appointing a custodian, receiver, trustee, liquidator or conservator of any US Obligor or of the whole or any substantial part of its properties, or approve a petition filed against any US Obligor seeking reorganization or arrangement or similar relief under the Federal Bankruptcy -43- Code or any other applicable law or statute of the United States or any state; or if, under the provisions of any other law for the relief or aid of debtors, a court of competent jurisdiction shall assume custody or control of any US Obligor or of the whole or any substantial part of its properties; or if there is commenced against any US Obligor any proceeding for any of the foregoing relief and such proceeding or petition remains undismissed for a period of sixty days; or if any US Obligor by any act indicates its consent to or approval of any such proceeding or petition; or (xvi) with respect to any Obligor or any ERISA Affiliate thereof, an ERISA Event shall occur with respect to an Employee Plan and there shall result from such ERISA Event a liability which, individually or in the aggregate, has a material adverse effect upon the financial condition of such Obligor, then, and in any such case and at any time thereafter, the Facility Agent may (and, if so instructed by an Instructing Group, shall) by written notice to the Borrowers: (a) declare the Advances to be immediately due and payable (in the case of an Event of Default specified in paragraphs (i) - (xi), and (xiii) - (xv) above) or due and payable within seven days of demand of the Facility Agent (in any other case) (whereupon the same shall become so payable together with accrued interest thereon and any other sums then owed by any Obligor hereunder) or declare the Advances to be due and payable on demand of the Facility Agent; and/or (b) require the relevant Borrower to procure that the obligations of each of the Banks in respect of each Letter of Credit are promptly reduced to zero or provide 100% cash security (in the currency in which such Letter of Credit is denominated) in a manner acceptable to each Bank in respect thereof (whereupon the relevant Borrower shall do so); and/or (c) declare that the Facilities shall be cancelled, whereupon the same shall be cancelled and the Commitment of each Bank shall be reduced to zero (Provided, however, that notwithstanding the above, if there shall occur an Event of Default under Clause 25.1(xiv) or Clause 25.1(xv) then the obligations of the Banks to lend hereunder shall automatically terminate and any and all of the Advances and other obligations shall be immediately due and payable without any action by the Facility Agent or any Bank). 25.2 Facilities Due on Demand If, pursuant to Clause 25.1 (Events of Default), the Facility Agent declares the Advances to be due and payable on demand of the Facility Agent, then, and at any time thereafter, the Facility Agent may (and, if so instructed by an Instructing Group, shall) by written notice to the Borrowers call for repayment of the Advances on such date as it may specify in such notice (whereupon the same shall become due and payable on such date together with, in the case of payments in respect of Advances, accrued interest thereon and any other sums then owed by the Obligors hereunder) or withdraw its declaration with effect from such date as it may specify in such notice. -44- PART 11 GUARANTEE 26. Guarantee and Indemnity 26.1 Guarantee: Principal Company The Principal Company irrevocably and unconditionally guarantees to the Agents, the Arrangers and the Banks the due and punctual observance and performance of all the terms, conditions and covenants on the part of each other Obligor under this Agreement and agrees to pay to the Facility Agent for its account or for the account of the Banks, the Arrangers and the other Agents from time to time on demand any and every sum or sums of money which any such other Obligor is at any time liable to pay to the Agents, the Arrangers and the Banks or any of them under or pursuant to this Agreement and which has become due and payable but has not been paid at the time such demand is made. 26.2 Indemnity: Principal Company The Principal Company irrevocably and unconditionally agrees as a primary obligation to indemnify the Agents, the Arrangers and the Banks from time to time on demand by the Facility Agent from and against any loss incurred by the Agents, the Arrangers and the Banks or any of them as a result of any of the obligations of any other Obligor under or pursuant to this Agreement being or becoming void, voidable, unenforceable or ineffective as against such Obligor for any reason whatsoever, whether or not known to the Agents, the Arrangers and the Banks or any of them or any other person, the amount of such loss being the amount which the person or persons suffering it would otherwise have been entitled to recover from such Obligor. 26.3 Guarantee: Ahold USA Ahold USA irrevocably and unconditionally guarantees to the Agents, the Arrangers and the Banks the due and punctual observance and performance of all the terms, conditions and covenants on the part of the Principal Company contained in this Agreement and agrees to pay to the Facility Agent for its account or for the account of the Banks, the Arrangers and the other Agents from time to time on demand any and every sum or sums of money which the Principal Company is at any time liable to pay to the Agents, the Arrangers and the Banks or any of them under or pursuant to this Agreement and which has become due and payable but has not been paid at the time such demand is made. 26.4 Indemnity: Ahold USA Ahold USA irrevocably and unconditionally agrees as a primary obligation to indemnify the Agents, the Arrangers and the Banks from time to time on demand by the Facility Agent from and against any loss incurred by the Agents, the Arrangers and the Banks or any of them as a result of any of the obligations of the Principal Company under or pursuant to this Agreement being or becoming void, voidable, unenforceable or ineffective as against the Principal Company for any reason whatsoever, whether or not known to the Agents, the Arrangers and the Banks or any of them or any other person, the amount of such loss being the amount which the person or persons suffering it would otherwise have been entitled to recover from the Principal Company. 26.5 Additional Security The obligations of each Guarantor herein contained shall be in addition to and independent of every other security which the Agents, the Arrangers and the Banks or any of them may at any time hold in respect of any obligations of any Obligor hereunder. 26.6 Continuing Obligations The obligations of each Guarantor herein contained shall constitute and be continuing obligations notwithstanding any settlement of account or other matter or thing whatsoever and shall not be considered satisfied by any intermediate payment or satisfaction of all or any of the obligations of any Obligor under this Agreement and shall continue in full force and effect until final payment in full of all amounts owing by each Obligor hereunder and total satisfaction of all the Obligors' actual and contingent obligations hereunder. -45- 26.7 Obligations not Discharged Neither the obligations of each Guarantor herein contained nor the rights, powers and remedies conferred in respect of such Guarantor upon the Agents, the Arrangers and the Banks or any of them by this Agreement or by law shall be discharged, impaired or otherwise affected by: (a) the winding-up, dissolution, administration or re-organisation of any other Obligor or any other person or any change in its status, function, control or ownership; (b) any of the obligations of any other Obligor or any other person hereunder or under any other security taken in respect of any of its obligations hereunder being or becoming illegal, invalid, unenforceable or ineffective in any respect; (c) time or other indulgence being granted or agreed to be granted to any other Obligor in respect of its obligations hereunder or under any such other security; (d) any amendment to, or any variation, waiver or release of, any obligation of any other Obligor hereunder or under any such other security; (e) any failure to take, or fully to take, any security contemplated hereby or otherwise agreed to be taken in respect of any other Obligor's obligations hereunder; (f) any failure to realise or fully to realise the value of, or any release, discharge, exchange or substitution of, any security taken in respect of any other Obligor's obligations hereunder; or (g) any other act, event or omission which, but for this Clause 26.7, might operate to discharge, impair or otherwise affect any of the obligations of such Obligor herein contained or any of the rights, powers or remedies conferred upon the Agents, the Arrangers and the Banks or any of them by this Agreement or by law. 26.8 Settlement Conditional Any settlement or discharge between the Guarantors and the Agents, the Arrangers and the Banks or any of them shall be conditional upon no security or payment to the Agents, the Arrangers and the Banks or any of them by any Obligor or any other person on behalf of such Obligor being avoided or reduced by virtue of any provisions or enactments relating to bankruptcy, insolvency, liquidation or similar laws of general application for the time being in force and, if any such security or payment is so avoided or reduced, the Agents, the Arrangers and the Banks shall each be entitled to recover the value or amount of such security or payment from such Guarantor subsequently as if such settlement or discharge had not occurred. 26.9 Exercise of Rights Neither the Agents, the Arrangers and the Banks nor any of them shall be obliged before exercising any of the rights, powers or remedies conferred upon them in respect of any Guarantor by this Agreement or by law: (a) to make any demand of any other Obligor; (b) to take any action or obtain judgment in any court against any other Obligor; (c) to make or file any claim or proof in a winding-up or dissolution of any other Obligor; or (d) to enforce or seek to enforce any other security taken in respect of any of the obligations of any other Obligor hereunder. -46- 26.10 Deferral of Borrowers' Rights Each Guarantor agrees that, so long as any amounts are or may be owed by any other Obligor hereunder or any other Borrower is under any actual or contingent obligations hereunder, such Guarantor shall not exercise any rights which it may at any time have by reason of performance by it of its obligations hereunder: (a) to be indemnified by any other Obligor; and/or (b) to claim any contribution from any other Obligor or any other guarantor of any other Obligor's obligations hereunder; and/or (c) to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Agents, the Arrangers and the Banks hereunder or of any other security taken pursuant to, or in connection with, this Agreement by all or any of the Agents, the Arrangers and the Banks. 26.11 Suspense Accounts All moneys received, recovered or realised by a Bank by virtue of Clause 26.1 (Guarantee: Principal Company) or Clause 26.3 (Guarantee: Ahold USA) or Clause 26.2 (Indemnity: Principal Company) or Clause 26.4 (Indemnity) may, in that Bank's discretion, be credited to a suspense or impersonal account and may be held in such account for so long as such Bank thinks fit pending the application from time to time (as such Bank may think fit) of such moneys in or towards the payment and discharge of any amounts owing by any of the Obligors to such Bank hereunder. -47- PART 12 DEFAULT INTEREST AND INDEMNITY 27. Default Interest and Indemnity 27.1 Default Interest Periods If any sum due and payable by any of the Obligors hereunder (other than in relation to a Swing-Line Advance) is not paid on the due date therefor in accordance with the provisions of Clause 29 (Payments) or if any sum due and payable by any of the Obligors under any judgment of any court in connection herewith is not paid on the date of such judgment, the period beginning on such due date or, as the case may be, the date of such judgment and ending on the date upon which the obligation of such Obligor to pay such sum (the balance thereof for the time being unpaid being herein referred to as an "unpaid sum") is discharged shall be divided into successive periods, each of which (other than the first) shall start on the last day of the preceding such period shall be of such duration (not exceeding three months) as the Facility Agent may select (except as otherwise provided in this Clause 27). 27.2 Default Interest During each such period relating thereto as is mentioned in Clause 27.1 (Default Interest Periods) an unpaid sum referred to in Clause 27.1 shall bear interest at the rate per annum which is the sum from time to time of two per cent., the Margin and LIBOR determined in respect of such unpaid sum for such period Provided that: (a) if, for any such period, LIBOR cannot be determined, the rate of interest applicable to each part of any unpaid sum owed to any Bank shall be the sum from time to time of two per cent., the Margin and the rate per annum (rounded upwards to the nearest four decimal places) notified (together with reasonable evidence that such rate is applicable) by such Bank to the Facility Agent (who shall notify the Borrower thereof) before the last day of such period to be that which expresses as a percentage rate per annum the cost to it of funding from whatever source it may select its portion of such unpaid sum for such period; and (b) if such unpaid sum is all or part of a Revolving Credit or Short-Term Advance which became due and payable on a day other than the last day of the Term thereof, the first such period applicable thereto shall be of a duration equal to the unexpired portion of that Term and the rate of interest applicable thereto from time to time during such period shall be that which exceeds by two per cent. the rate which would have been applicable to it had it not so fallen due. 27.3 Swing-Line Default Interest If any sum due and payable by the Borrower hereunder in respect of a Swing-Line Advance is not paid on the due date therefor in accordance with the provisions of Clause 29 (Payments) or if any sum due and payable by the Borrower under any judgment of any court in connection with any Swing-Line Advance is not paid on the date of such judgment, then interest shall accrue on such sum on each day (a "relevant day") from and including the due date thereof or the date of such judgment (as the case may be ) until (but excluding) the date of actual payment at a rate per annum (as determined by the Swing-Line Agent at 11.00 a.m. on each such relevant day) equal to the sum of two per cent. and the greater of: (i) the Prime Rate for such relevant day; and (ii) the sum of the Federal Funds Rate for such relevant day and the Swing- Line Margin. -48- 27.4 Payment of Default Interest Any interest which shall have accrued under Clause 27.2 (Default Interest) and Clause 27.3 (Swing-Line Default Interest) in respect of any sum shall be due and payable and shall be paid by the Obligor owing such sum at the end of the period by reference to which it is calculated or on such other date or dates as the Facility Agent may specify by written notice to such Obligor. 27.5 Broken Periods If any Bank or the Facility Agent on its behalf receives or recovers all or any part of an Advance made by such Bank otherwise than on the last day of the Term thereof, the Obligor to whom such Advance was made shall pay to the Facility Agent on demand for account of such Bank an amount equal to the amount (if any) by which (a) the additional interest which would have been payable on the amount so received or recovered had it been received or recovered on the last day of the Term thereof exceeds (b) the amount of interest which in the opinion of the Facility Agent would have been payable to the Facility Agent on the last day of the Term thereof in respect of a deposit in the currency of the amount so received or recovered equal to the amount so received or recovered placed by it with a prime bank in London for a period starting on the third business day following the date of such receipt or recovery and ending on the last day of the Term thereof. 27.6 The Principal Company's Indemnity The Principal Company undertakes to indemnify: (a) each of the Agents, the Arrangers and the Banks against any cost, claim, loss, expense (including legal fees) or liability together with any VAT thereon, which any of them may sustain or incur as a consequence of the occurrence of any Event of Default or any payment default by any of the Obligors hereunder; (b) each Agent against any loss it may suffer as a result of its entering into, or performing, any foreign exchange contract for the purposes of Part 13; and (c) each Bank against any loss it may suffer as a result of its funding an Advance requested by any of the Borrowers hereunder but not made by reason of the operation of any one or more of the provisions hereof. 27.7 Unpaid Sums as Advances Any unpaid sum shall (for the purposes of this Clause 27 and Clause 20.1 (Increased Costs)) be treated as an advance and accordingly in this Clause 27 and Clause 20.1 (Increased Costs) the term "Advance" includes any unpaid sum and "Term", in relation to an unpaid sum, includes each such period relating thereto as is mentioned in Clause 20.1 (Default Interest Periods). -49- PART 13 PAYMENTS 28. Currency of Account and Payment 28.1 Currency of Account The dollar is the currency of account and payment for each and every sum at any time due from any of the Obligors hereunder Provided that: (a) each repayment of an Advance or a part thereof shall be made in the currency in which such Advance is denominated at the time of that repayment; (b) each payment in respect of a Letter of Credit shall be made in the currency in which such Letter of Credit is denominated; (c) each payment of interest shall be made in the currency in which the sum in respect of which such interest is payable is denominated; (d) each payment in respect of costs and expenses shall be made in the currency in which the same were incurred; (e) each payment pursuant to Clause 18.2 (Tax Indemnity) or Clause 20.1 (Increased Costs) shall be made in the currency specified by the party claiming thereunder; and (f) any amount expressed to be payable in a currency other than dollars shall be paid in that other currency. 28.2 Currency Indemnity If any sum due from any of the Obligors under this Agreement or any order or judgment given or made in relation hereto has to be converted from the currency (the "first currency") in which the same is payable hereunder or under such order or judgment into another currency (the "second currency") for the purpose of (a) making or filing a claim or proof against such Obligor, (b) obtaining an order or judgment in any court or other tribunal or (c) enforcing any order or judgment given or made in relation hereto or if any such sum is paid in the second currency, the Principal Company shall indemnify and hold harmless each of the persons to whom such sum is due from and against any loss suffered as a result of any discrepancy between (i) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (ii) the rate or rates of exchange at which such person may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. 29. Payments 29.1 Payments to the Agents On each date on which this Agreement requires an amount to be paid by any Obligor or any of the Banks hereunder, such Obligor or, as the case may be, such Bank shall make the same available to the Facility Agent or, in the case of an amount to be paid in an Optional Currency, the Multicurrency Facility Agent: (a) where such amount is denominated in dollars, by payment in dollars and in same day funds (or in such other funds as may for the time being be customary in New York City for the settlement in New York City of international banking transactions in dollars) to the Facility Agent's account number 323510027 with The Chase Manhattan Bank, New York, N.Y., United States of America under account name Ahold USA Holdings, Inc. and ABA -50- Number 021000021 (or such other account or bank as the Facility Agent may have specified for this purpose); or (b) where such amount is denominated in an Optional Currency, by payment in such Optional Currency and in immediately available, freely transferable, cleared funds to such account with such bank in the principal financial centre of the country of such Optional Currency as the Multicurrency Facility Agent shall have specified for this purpose. Any payment received by any Agent from any Obligor in accordance with the foregoing shall, without prejudice to such Agent's or any Bank's rights to reclaim or reassert its rights to payment from the Obligors of any amount which such Agent or such Bank is required to repay to the Obligors for any reason, constitute fulfilment by the Obligors of its obligation to make such payment hereunder. 29.2 Alternative Payment Arrangements If, at any time, it shall become impracticable (by reason of any action of any governmental authority or any change in law, exchange control regulations or any similar event) for any or all of the Obligors to make any payments hereunder in the manner specified in Clause 29.1 (Payments to the Agents), then such Obligor may agree with each or any of the Banks alternative arrangements for the payment direct to such Bank of amounts due to such Bank hereunder Provided that, in the absence of any such agreement with any Bank, such Obligor shall be obliged to make all payments due to such Bank in the manner specified herein. Upon reaching such agreement such Obligor and such Bank shall immediately notify the appropriate Agent thereof and shall thereafter promptly notify such Agent of all payments made direct to such Bank. 29.3 Payments by the Agents Save as otherwise provided herein, each payment received by any Agent for the account of another person pursuant to Clause 29.1 (Payments to the Agents) shall: (a) in the case of a payment received for the account of any Obligor, be made available by such Agent to such Obligor by application: (i) first, in or towards payment (on the date, and in the currency and funds, of receipt) of any amount then due from such Obligor hereunder to the person from whom the amount was so received or in or towards the purchase of any amount of any currency to be so applied; and (ii) secondly, in or towards payment (on the date, and in the currency and funds, of receipt) to such account with such bank in the principal financial centre of the country of the currency of such payment as such Obligor shall have previously notified to such Agent for this purpose; and (b) in the case of any other payment, be made available by such Agent to the person for whose account such payment was received (in the case of a Bank, for the account of its relevant Facility Office) for value the same day by transfer to such account of such person with such bank in the principal financial centre of the country of the currency of such payment as such person shall have previously notified to such Agent. 29.4 Payments under the Short-Term Advances Facility In the case of the acceptance of an offer pursuant to Clause 11 (Acceptance of Offers) for Short- Term Advances the provisions of Clause 29.1 (Payments to the Agents) shall not apply to the making of the relevant Short-Term Advance by the relevant Bank or the repayment thereof or the payment of any interest thereon on or prior to its Repayment Date. All such payments shall be paid directly to the relevant Obligor by the relevant Bank or, as the case may be, by the relevant Obligor to the relevant -51- Bank, in each case, in such manner as the relevant Obligor and the relevant Bank shall agree. The relevant Bank shall promptly notify the Short-Term Advances Agent if any payment referred to in this Clause 29.4 is not met in full on its due date specifying the amount and currency of any shortfall. 29.5 No Set-off All payments required to be made by any of the Obligors hereunder shall be calculated without reference to any set-off or counterclaim and shall be made free and clear of and without any deduction for or on account of any set-off or counterclaim. 29.6 Clawback Where a sum is to be paid hereunder to an Agent for account of another person, such Agent shall not be obliged to make the same available to that other person or to enter into or perform any exchange contract in connection therewith until it has been able to establish to its satisfaction that it has actually received such sum, but if it does so and it proves to be the case that it had not actually received such sum, then the person to whom such sum or the proceeds of such exchange contract were so made available shall on request refund the same to such Agent together with an amount sufficient to indemnify such Agent against any cost or loss it may have suffered or incurred by reason of its having paid out such sum or the proceeds of such exchange contract prior to its having received such sum. 30. Set-off 30.1 Contractual Set-off Each of the Obligors authorises each Bank to apply and each Bank shall be entitled to set-off any credit balance to which such Obligor is entitled on any account of such Obligor with that Bank in satisfaction of any sum due and payable from such Obligor to such Bank hereunder but unpaid; for this purpose, each Bank is authorised to purchase with the moneys standing to the credit of any such account such other currencies as may be necessary to effect such application. 30.2 Set-off not Mandatory No Bank shall be obliged to exercise any right given to it by Clause 30.1 (Contractual Set-off). 31. Sharing 31.1 Redistribution of Payments Subject to Clause 31.3 (Recoveries Through Legal Proceedings), if, at any time, the proportion which any Bank (a "Recovering Bank") has received or recovered (whether by payment, the exercise of a right of set-off or combination of accounts or otherwise) in respect of its portion of any payment (a "relevant payment") to be made under this Agreement by any of the Obligors for account of such Recovering Bank and one or more other Banks is greater (the portion of such receipt or recovery giving rise to such excess proportion being herein called an "excess amount") than the proportion thereof so received or recovered by the Bank or Banks so receiving or recovering the smallest proportion thereof, then: (a) such Recovering Bank shall pay to the relevant Agent an amount equal to such excess amount; (b) there shall thereupon fall due from such Obligor to such Recovering Bank an amount equal to the amount paid out by such Recovering Bank pursuant to paragraph (a) above, the amount so due being, for the purposes hereof, treated as if it were an unpaid part of such Recovering Bank's portion of such relevant payment; and (c) such Agent shall treat the amount received by it from such Recovering Bank pursuant to paragraph (a) above as if such amount had been received by it from such Obligor in -52- respect of such relevant payment and shall pay the same to the persons entitled thereto (including such Recovering Bank) pro rata to their respective entitlements thereto, Provided that to the extent that any excess amount is attributable to a payment to a Bank pursuant to paragraph (a)(i) of Clause 29.3 (Payments by the Agents) such portion of such excess amount as is so attributable shall not be required to be shared pursuant hereto. 31.2 Repayable Recoveries If any sum (a "relevant sum") received or recovered by a Recovering Bank in respect of any amount owing to it by any of the Obligors becomes repayable and is repaid by such Recovering Bank, then: (a) each Bank which has received a share of such relevant sum by reason of the implementation of Clause 31.1 (Redistribution of Payments) shall, upon request of the relevant Agent, pay to such Agent for account of such Recovering Bank an amount equal to its share of such relevant sum; and (b) there shall thereupon fall due from such Obligor to each such Bank an amount equal to the amount paid out by it pursuant to paragraph (a) above, the amount so due being, for the purposes hereof, treated as if it were the sum payable to such Bank against which such Bank's share of such relevant sum was applied. 31.3 Recoveries Through Legal Proceedings If any Bank shall commence any action or proceeding in any court to enforce its rights hereunder after consultation with the other Banks and, as a result thereof or in connection therewith, shall receive any excess amount (as defined in Clause 31.1 (Redistribution of Payments)), then such Bank shall not be required to share any portion of such excess amount with any Bank which has the legal right to, but does not, join in such action or proceeding or commence and diligently prosecute a separate action or proceeding to enforce its rights in another court. -53- PART 14 FEES, COSTS AND EXPENSES 32. Fees 32.1 Facility Fee The Principal Company shall pay to the Facility Agent for account of each Bank a facility fee on the amount of the Total Commitments from time to time during the period (the "relevant period") beginning on the date hereof and ending on the Termination Date, such facility fee to be calculated: (i) in respect of the period commencing on the date hereof and ending on the date which is the fifth anniversary of the date hereof, at the rate of 0.10 per cent. per annum; and (ii) thereafter, at the rate of 0.1125 per cent. per annum. and to be payable in arrear on the last day of each successive period of three months which ends during the relevant period and on the Termination Date. 32.2 Participation Fee The Principal Company shall pay to the Facility Agent for the account of the Arrangers and the Banks the fees specified in the mandate letter signed by the Borrower on 18 November 1996 at the times, and in the amounts, specified in such letter. 32.3 Agency Fee The Principal Company shall pay to the Facility Agent for its own account the agency fees specified in the letter of even date herewith from the Facility Agent to the Principal Company at the times, and in the amounts, specified in such letter. 33. Costs and Expenses 33.1 Transaction Expenses The Principal Company shall, on demand of the Facility Agent, reimburse each of the Agents and the Arrangers for all reasonable legal and out-of-pocket costs and expenses (including printing and publicity costs) together with any VAT thereon incurred by it in connection with the negotiation, preparation and execution of this Agreement and the completion of the transactions herein contemplated. 33.2 Preservation and Enforcement of Rights The Principal Company shall, from time to time on demand of the Facility Agent, reimburse each of the Agents, the Arrangers and the Banks for all costs and expenses (including legal fees) together with any VAT thereon incurred in or in connection with the preservation and/or enforcement of any of the rights of any of the Agents, the Arrangers and the Banks under this Agreement. 33.3 Stamp Taxes The Principal Company shall pay all stamp, registration and other taxes to which this Agreement is or at any time may be subject and shall, from time to time on demand of the Facility Agent, indemnify each of the Agents, the Arrangers and the Banks against any liabilities, costs, claims and expenses resulting from any failure to pay or any delay in paying any such tax. 33.4 Agents' Costs The Principal Company shall, from time to time on demand of the Facility Agent (and without prejudice to the provisions of Clause 33.2 (Preservation and Enforcement of Rights) and Clause 38.2 (Amendment Costs)) compensate each of the Agents at such daily and/or hourly rates as such Agent shall from time to time reasonably determine for the time and expenditure, all costs and expenses (including telephone, fax, copying, travel and personnel costs) incurred by such Agent in connection with its taking such action as it may deem appropriate or in complying with any instructions from an Instructing Group or any request by the Borrowers or any of them in connection with: -54- (a) the granting or proposed granting of any waiver or consent requested hereunder by the Borrowers or any of them; (b) any actual, potential or suspected breach by the Borrowers or any of them of its obligations hereunder; (c) the occurrence of any event which is an Event of Default or a Potential Event of Default; or (d) any amendment or proposed amendment hereto requested by the Borrowers or any of them. 33.5 Banks' Liabilities for Costs If the Principal Company fails to perform any of its obligations under this Clause 33, each Bank shall, in its Proportion, indemnify each of the Agents and the Arrangers against any loss incurred by either of them as a result of such failure and the Principal Company shall forthwith reimburse each Bank for any payment made by it pursuant to this Clause 33.5. -55- PART 15 AGENCY PROVISIONS 34. The Agents, the Arrangers and the Banks 34.1 Appointment of the Agents Each of the Arrangers and the Banks hereby appoints each of the Agents, and each of the Agents hereby appoints the Facility Agent, to act as its agent in connection herewith and authorises such Agent to exercise such rights, powers, authorities and discretions as are specifically delegated to such Agent by the terms hereof together with all such rights, powers, authorities and discretions as are reasonably incidental thereto. 34.2 Agent's Discretions Each Agent may: (a) assume that: (i) any representation made by any of the Borrowers in connection herewith is true; (ii) no Event of Default or Potential Event of Default has occurred; (iii) none of the Borrowers is in breach of or default under its obligations hereunder; and (iv) any right, power, authority or discretion vested herein upon an Instructing Group, the Banks or any other person or group of persons has not been exercised unless such Agent has, in its capacity as agent hereunder, actual knowledge of or received actual notice to the contrary from any other party hereto; (b) assume that the Facility Office or, as the case may be, each Facility Office of each Bank is that identified with its signature below (or, in the case of a Transferee, at the end of the Transfer Certificate to which it is a party as Transferee) until it has received from such Bank a notice designating some other office of such Bank to replace any such Facility Office and act upon any such notice until the same is superseded by a further such notice; (c) engage and pay for the advice or services of any lawyers, accountants, surveyors or other experts whose advice or services may to it seem necessary, expedient or desirable and rely upon any advice so obtained; (d) rely as to any matters of fact which might reasonably be expected to be within the knowledge of any of the Obligors upon a certificate signed by or on behalf of such Obligor; (e) rely upon any communication or document believed by it to be genuine; (f) refrain from exercising any right, power or discretion vested in it as agent hereunder unless and until instructed by an Instructing Group as to whether or not such right, power or discretion is to be exercised and, if it is to be exercised, as to the manner in which it should be exercised; and (g) refrain from acting in accordance with any instructions of an Instructing Group to begin any legal action or proceeding arising out of or in connection with this Agreement until it -56- shall have received such security as it may require (whether by way of payment in advance or otherwise) for all costs, claims, losses, expenses (including legal fees) and liabilities together with any VAT thereon which it will or may expend or incur in complying with such instructions. 34.3 Agent's Obligations Each Agent shall: (a) promptly inform each Bank of the contents of any notice or document received by it in its capacity as Agent from any of the Obligors hereunder; (b) promptly notify each Bank of the occurrence of any Event of Default or any default by any of the Borrowers in the due performance of or compliance with its obligations under this Agreement of which such Agent has actual knowledge or received actual notice from any other party hereto; (c) save as otherwise provided herein, act as agent hereunder in accordance with any instructions given to it by an Instructing Group, which instructions shall be binding on the Arrangers and all of the Banks; and (d) if so instructed by an Instructing Group, refrain from exercising any right, power or discretion vested in it as agent hereunder unless such right, power or discretion is vested in such Agent in its individual capacity hereunder or is a right, power or discretion that may be exercised against the Arrangers, any other Agent, the Banks or any of them. 34.4 Excluded Obligations Notwithstanding anything to the contrary expressed or implied herein, neither any Agent nor any of the Arrangers shall: (a) be bound to enquire as to: (i) whether or not any representation made by any of the Borrowers in connection herewith is true; (ii) the occurrence or otherwise of any Event of Default or Potential Event of Default; (iii) the performance by any of the Borrowers of its obligations hereunder; or (iv) any breach of or default by any of the Borrowers of or under its obligations hereunder; (b) be bound to account to any Bank for any sum or the profit element of any sum received by it for its own account; (c) be bound to disclose to any other person any information relating to any member of the Group if such disclosure would or might in its opinion constitute a breach of any law or regulation or be otherwise actionable at the suit of any person; or (d) be under any obligations or fiduciary duties other than those for which express provision is made herein. 34.5 Indemnification Each Bank shall, in its Proportion, from time to time on demand by any Agent, indemnify such Agent, against any and all costs, claims, losses, expenses (including legal fees) and liabilities -57- together with any VAT thereon which such Agent may incur in acting in its capacity as agent hereunder to the extent the same are not paid by any of the Obligors. Each Bank shall, following any payment made by it under this Clause 34.5, be entitled to recover from an Agent any amount which it establishes has been paid by it to such Agent pursuant to this Clause 34.5 in respect of costs, claims, losses, expenses (including legal fees) and liabilities incurred by such Agent as a result of such Agent's own gross negligence or wilful misconduct in acting in its capacity as agent hereunder. 34.6 Exclusion of Liabilities None of the Agents and the Arrangers accepts any responsibility for the accuracy and/or completeness of any information supplied by any of the Borrowers in connection herewith or for the legality, validity, effectiveness, adequacy or enforceability of this Agreement and none of the Agents and the Arrangers shall be under any liability as a result of taking or omitting to take any action in relation to this Agreement, save in the case of gross negligence or wilful misconduct. 34.7 No Actions Each of the Banks agrees that it will not assert or seek to assert against any director, officer or employee of any Agent or any Arranger any claim it might have against any of them in respect of the matters referred to in Clause 34.6 (Exclusion of Liabilities). 34.8 Business with the Group Each of the Agents and the Arrangers may accept deposits from, lend money to and generally engage in any kind of banking or other business with any member of the Group. 34.9 Resignation Each Agent may resign its appointment hereunder at any time without assigning any reason therefor by giving not less than thirty days' prior written notice to that effect to each of the other parties hereto Provided that no such resignation shall be effective until a successor for such Agent is appointed in accordance with the succeeding provisions of this Clause 34. 34.10 Removal of Agent An Instructing Group may remove any Agent from its appointment hereunder as Agent at any time by giving not less than thirty days' prior written notice to that effect to each of the other parties hereto provided that no such removal shall be effective until a successor for such Agent is appointed in accordance with the succeeding provisions of this Clause 34. 34.11 Successor Agent If an Agent gives notice of its resignation pursuant to Clause 34.9 (Resignation), then any reputable and experienced bank or other financial institution may be appointed as a successor to such Agent by an Instructing Group during the period of such notice but, if no such successor is so appointed, such Agent may appoint such a successor itself. 34.12 New Agent If an Instructing Group removes an Agent from its appointment hereunder pursuant to Clause 34.10 (Removal of Agent), then any reputable and experienced bank or other financial institution may be appointed, after consultation with the Principal Company, as a successor to such Agent by an Instructing Group. 34.13 Rights and Obligations If a successor to an Agent is appointed under the provisions of Clause 34.11 (Successor Agent) or Clause 34.12 (New Agent), then (a) the retiring Agent shall be discharged from any further obligation hereunder but shall remain entitled to the benefit of the provisions of this Clause 34 and (b) its successor and each of the other parties hereto shall have the same rights and obligations amongst themselves as they would have had if such successor had been a party hereto. 34.14 Own Responsibility It is understood and agreed by each Bank that it has itself been, and will continue to be, solely responsible for making its own independent appraisal of and investigations into the financial condition, creditworthiness, condition, affairs, status and nature of each Borrower and the Group and, accordingly, each -58- Bank warrants to each of the Agents and the Arrangers that it has not relied on and will not hereafter rely on any of the Agents and the Arrangers: (a) to check or enquire on its behalf into the adequacy, accuracy or completeness of any information provided by any of the Borrowers in connection with this Agreement or the transactions herein contemplated (whether or not such information has been or is hereafter circulated to such Bank by any Agent or Arranger); or (b) to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of any member of the Group. 34.15 Separation of Departments In acting as Agent and/or Arranger for the Banks, the agency department of each of the Agents and the Arrangers shall be treated as a separate entity from any other of its divisions or departments and, notwithstanding the foregoing provisions of this Clause 34, in the event that an Agent or, as the case may be, an Arranger should act for any member of the Group in any capacity in relation to any other matter, any information given by such member of the Group to such Agent or, as the case may be, such Arranger in such other capacity may be treated as confidential by such Agent or, as the case may be, such Arranger and shall not constitute actual knowledge of any matter for the purposes of Clause 34.2. 34.16 The Short-Term Advances Agent Ahold USA hereby appoints the Short-Term Advances Agent to act as its agent in connection with this Agreement and authorises the Short-Term Advances Agent to exercise such rights, powers and discretions as are specifically delegated to the Short-Term Advances Agent by the terms of this Agreement together with all such rights, powers and discretions as are reasonably incidental thereto. 34.17 Exoneration of Short-Term Advances Agent The Short-Term Advances Agent shall comply with the obligations expressly undertaken by it hereunder Provided that the accidental failure by the Short-Term Advances Agent to give any notice to any Bank of a Short-Term Advances Request delivered to it hereunder or to give any notice to Ahold USA of any offer for Short- Term Advances received by it hereunder shall not constitute a breach of the Short-Term Advances Agent's obligations hereunder nor shall any other party hereto be entitled to require such failure to be rectified after the latest time for the giving of the relevant notice hereunder. 34.18 Indemnity Ahold USA shall, on demand by the Short-Term Advances Agent, indemnify the Short-Term Advances Agent against any and all reasonable costs, claims, expenses (including reasonable legal fees) and liabilities which the Short-Term Advances Agent may incur, otherwise than by reason of its own negligence or wilful misconduct, in acting in its capacity as Short-Term Advances Agent under this Agreement. -59- PART 16 ASSIGNMENTS AND TRANSFERS 35. Assignments and Transfers 35.1 Binding Agreement This Agreement shall be binding upon and enure to the benefit of each party hereto and its or any subsequent successors, Transferees and assigns. 35.2 No Assignments and Transfers by the Obligors None of the Obligors shall be entitled to assign or transfer all or any of its rights, benefits and obligations hereunder. 35.3 Assignment and Transfers by Banks Any Bank may, at any time, assign all or (subject to the proviso below) any of its rights and benefits hereunder or transfer in accordance with Clause 35.5 all or any of its rights, benefits and obligations hereunder (i) to any holding company, any of its wholly-owned subsidiaries or any affiliate or (ii) with the prior written consent of the Principal Company (not to be unreasonably withheld or delayed) to any other person provided that (without prejudice to a Bank's right to assign and/or transfer all of its rights, benefits and obligations hereunder in accordance with this Clause 35.3) a Bank shall be entitled to assign and/or transfer part of its Participation hereunder only in an amount equal to or exceeding $10,000,000 and then only if it retains a Participation of not less than $25,000,000. 35.4 Assignments by Banks If any Bank assigns all or any of its rights and benefits hereunder in accordance with Clause 35.3 (Assignments and Transfers by Banks), then, unless and until the assignee has agreed with the Principal Company, the Agents, the Arrangers and the other Banks that it shall be under the same obligations towards each of them as it would have been under if it had been an original party hereto as a Bank (whereupon such assignee shall become a party hereto as a "Bank"), the Agents, the Arrangers and the other Banks shall not be obliged to recognise such assignee as having the rights against each of them which it would have had if it had been such a party hereto. The Assignee shall be responsible for giving notice of the assignment to the relevant Obligors. 35.5 Transfers by Banks If any Bank wishes to transfer all or any of its rights, benefits and/or obligations hereunder as contemplated in Clause 35.3 (Assignments and Transfers by Banks), then such transfer may be effected by the delivery to and signature by the Facility Agent on behalf of the Obligors (and each of the Obligors hereby irrevocably appoints the Facility Agent as its agent for the purposes of such delivery and signature of any Transfer Certificate) of a duly completed and duly executed Transfer Certificate in which event it is hereby irrevocably agreed by each of the Obligors in advance that, on the later of the Transfer Date specified in such Transfer Certificate and the fifth business day after (or such earlier business day endorsed by the Facility Agent on such Transfer Certificate falling on or after) the date of delivery of such Transfer Certificate to and signature by the Facility Agent on behalf of the Obligors (which signature the Facility Agent agrees to complete promptly upon receipt of the relevant Transfer Certificate in accordance with this Clause 35): (a) to the extent that in such Transfer Certificate the Bank party thereto seeks to transfer its rights, benefits and obligations hereunder each of the Obligors and such Bank shall be released from further obligations towards one another hereunder and their respective rights against one another shall be cancelled (such rights, benefits and obligations being referred to in this Clause 35.5 as "discharged rights and obligations"); (b) each of the Obligors and the Transferee party thereto shall assume obligations towards one another and/or acquire rights against one another which differ from such discharged rights and -60- obligations only insofar as such Obligor and such Transferee have assumed and/or acquired the same in place of such Obligor and such Bank; (c) the Agents, the Arrangers, such Transferee and the other Banks shall acquire the same rights and benefits and assume the same obligations between themselves as they would have acquired and assumed had such Transferee been an original party hereto as a Bank with the rights, benefits and/or obligations acquired or assumed by it as a result of such transfer; (d) such Transferee shall become a party hereto as a "Bank" and will also be deemed to have appointed the Agents as its Agent in accordance with the terms of this Agreement; and (e) to the extent that in such Transfer Certificate the Bank party thereto seeks to transfer its Commitment, the Transferee shall replace such Bank in respect of any relevant Letter of Credit. Receipt of a Transfer Certificate by the Facility Agent shall also constitute notice to the Obligors as required by Dutch law and each party hereto hereby irrevocably authorises and instructs the Facility Agent to receive each such notice on its behalf and irrevocably agrees that each such notice to be given to such party may be given to the Facility Agent as representative of such party. 35.6 Transfer Fee On the date upon which a transfer takes effect pursuant to Clause 35.5 (Transfers by Banks) the Transferee in respect of such transfer shall pay to the Facility Agent for its own account a transfer fee of $1,000. All costs of any transfer of any Bank's rights, benefits and obligations hereunder to any Transferee (including, without limitation, any stamp duty) shall be for the account of such Bank. 35.7 Excess Amounts If any Bank assigns or transfers any of its rights, benefits and obligations hereunder or changes its Facility Office and there arises (by reason of circumstances existing at the date of such assignment or transfer or which are not existing at such date but which are scheduled to take effect or in respect of which there is a general consensus that they will take effect after the date thereof) an obligation on the part of a Borrower to such Bank or its assignee or transferee or any other person any amount in excess of the amount it would have been obliged to pay but for such assignment, transfer or change, then such Borrower shall not be obliged to pay the amount of such excess. 35.8 Disclosure of Information Any Bank may disclose to any actual or potential assignee or Transferee or to any person who may otherwise enter into contractual relations with such Bank in relation to this Agreement such information about the Borrowers and the Group as such Bank shall consider appropriate. -61- PART 17 MISCELLANEOUS 36. Calculations and Evidence of Debt 36.1 Basis of Accrual Interest and the facility fee shall accrue from day to day and shall be calculated on the basis of a year of 360 days (or, if market practice differs, in accordance with market practice) and the actual number of days elapsed. 36.2 Accrual of Letter of Credit Commission Letter of credit commission in respect of any Letter of Credit, and any period of the Term thereof determined pursuant to Clause 6 (Letters of Credit Fees and Fronting Fee), shall be calculated on the basis of a year of 360 days and the actual number of days in such period. 36.3 Quotations If on any occasion a Reference Bank or Bank fails to supply any Agent with a quotation required of it under the foregoing provisions of this Agreement, the rate for which such quotation was required shall be determined from those quotations which are supplied to such Agent. 36.4 Evidence of Debt Each Bank shall maintain in accordance with its usual practice accounts evidencing the amounts from time to time lent by and owing to it hereunder. 36.5 Control Accounts The Facility Agent shall maintain on its books a control account or accounts in which shall be recorded (a) the amount of any Advance made or arising hereunder (and the name of the Bank to whom such sum relates and each Bank's share therein) and the face amount of any Letter of Credit issued (and each Bank's share therein) as the case may be, (b) the amount of all principal, interest and other sums due or to become due from any of the Borrowers to any of the Banks hereunder and each Bank's share therein and (c) the amount of any sum received or recovered by any Agent hereunder and each Bank's share therein. The Facility Agent shall, upon request of any Borrower, deliver to such Borrower statements of the accounts referred to in this Clause 36.5. 36.6 Prima Facie Evidence In any legal action or proceeding arising out of or in connection with this Agreement, the entries made in the accounts maintained pursuant to Clause 36.4 (Evidence of Debt) and Clause 36.5 (Control Accounts) shall be prima facie evidence of the existence and amounts of the obligations of the Borrowers therein recorded. 36.7 Certificates of Banks A certificate of a Bank as to (a) the amount by which a sum payable to it hereunder is to be increased under Clause 18.1 (Tax Gross-up) or (b) the amount for the time being required to indemnify it against any such cost, payment or liability as is mentioned in Clause 18.2 (Tax Indemnity) or Clause 20.1 (Increased Costs) or Clause 27.5 (Broken Periods) or Clause 28.2 (Currency Indemnity) shall be conclusive evidence for the purposes of this Agreement save in the case of manifest error. 36.8 Agents' Certificates A certificate of any Agent as to the amount at any time due from any Borrower hereunder or the amount which, but for any of the obligations of any Borrower hereunder being or becoming void, voidable, unenforceable or ineffective, at any time would have been due from such Borrower hereunder shall, in the absence of manifest error, be conclusive for the purposes of Part 11 (Guarantee). 37. Remedies and Waivers, Partial Invalidity 37.1 Remedies and Waivers No failure to exercise, nor any delay in exercising, on the part of any party hereto, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of -62- any right or remedy prevent any further or other exercise thereof or the exercise of any other right or remedy. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. 37.2 Partial Invalidity If, at any time, any provision hereof is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions hereof nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. 38. Amendments 38.1 Amendments With the prior written consent of an Instructing Group, the Facility Agent and the Principal Company may from time to time enter into written amendments, supplements or modifications hereto for the purpose of adding any provisions to this Agreement or changing in any manner the rights of all or any of the Agents, the Arrangers and the Banks or of any Obligor hereunder, and, at the request of the Principal Company with the prior consent of an Instructing Group, the Facility Agent on behalf of the other Agents, the Arrangers and the Banks may execute and deliver to the Principal Company a written instrument waiving prospectively or retrospectively, on such terms and conditions as the Facility Agent may specify in such instrument, any of the requirements of this Agreement or any Event of Default or Potential Event of Default and its consequences Provided, however, that: (i) no such waiver and no such amendment, supplement or modification shall without the prior consent of all the Banks: (a) amend or modify the definitions of Additional Borrower, Instructing Group, Margin, Swing-Line Margin or Termination Date; (b) amend, modify or waive any provision which requires the prior written consent of the Banks, Clause 32 (Fees), Clause 35.2 (No Assignments and Transfers by the Obligors) or this Clause 38; (c) change the principal or currency of any Advance or Letter of Credit or extend the Term thereof; (d) decrease the amount of, or change the currency of or extend the date for any payment of interest, fees or any other amount payable to all or any of the Agents, the Arrangers and the Banks hereunder; (e) increase the amount of the Total Commitments; or (f) release any Guarantor from all or any of its obligations hereunder; (ii) notwithstanding any other provision hereof, the Facility Agent shall not be obliged to agree to any such waiver, amendment, supplement or modification if the same would: (a) amend, modify or waive any provision of this Clause 38; or (b) otherwise amend, modify or waive any of the Agents' or the Arrangers' rights hereunder or subject any Agent or, as the case may be, any Arranger to any additional obligations hereunder; and -63- (iii) the Facility Agent shall promptly notify the Banks of any written amendments, supplements or modifications hereto which have been made with the consent of an Instructing Group and the Borrower. 38.2 Amendment Costs If the Principal Company requests any amendment, supplement, modification or waiver in accordance with Clause 38.1, then the Principal Company shall, on demand of the Facility Agent, reimburse the Facility Agent for all reasonable costs and expenses (including reasonable legal fees) together with any VAT thereon incurred by the Facility Agent in the negotiation, preparation and execution of any written instrument contemplated by Clause 38.1. 39. Notices 39.1 Communications in Writing Each communication to be made hereunder shall be made in writing but, unless otherwise stated, may be made by telefax or letter Provided that the Borrowers shall indemnify each of the Agents, the Arrangers and the Banks against any cost, claims, loss, expense (including legal fees) or liability together with any VAT thereon which any of them may sustain or incur as a consequence of any telefax communication originating from any Borrower not being actually received by or delivered to the intended recipient thereof or any telefax communication purporting to originate from any Borrower being made or delivered fraudulently. 39.2 Delivery Any communication or document (unless made by telefax or telephone) to be made or delivered by one person to another pursuant to this Agreement shall (unless that other person has by fifteen days' written notice to the Facility Agent specified another address) be made or delivered to that other person at the address identified with its signature below (or, in the case of a Transferee, at the end of the Transfer Certificate to which it is a party as Transferee) and shall be deemed to have been made or delivered when left at that address or (as the case may be) ten days after being deposited in the post postage prepaid in an envelope addressed to it at that address Provided that: (a) any communication or document to be made or delivered to any Agent shall be effective only when received by such Agent and then only if the same is expressly marked for the attention of the department or officer identified with such Agent's signature below (or such other department or officer as such Agent shall from time to time specify for this purpose); and (b) any communication or document to be made or delivered to any Bank having more than one Facility Office shall (unless such Bank has by fifteen days' written notice to the Facility Agent specified another address) be made or delivered to such Bank at the address identified with its signature below (or, in the case of a Transferee, at the end of the Transfer Certificate to which it is a party as Transferee) as its main Facility Office. 39.3 Communications by telephone or telefax Where any provision of this Agreement specifically contemplates telephone or telefax communication made by one person to another, such communication shall be made to that other person at the relevant telephone number specified by it from time to time for the purpose and shall be deemed to have been received when made (in the case of any communication by telephone) or when transmission of such telefax communication has been completed (in the case of any telecommunication by telefax). Each such telefax communication, if made to any Agent by a Borrower shall be signed by the person or persons authorised by such Borrower in the certificate delivered pursuant to the Third Schedule and shall be expressed to be for the attention of the department or officer whose name has been notified for the time being for that purpose by such Agent to such Borrower. -64- 39.4| English Language Each communication and document made or delivered by one party to another pursuant to this Agreement shall be in the English language or accompanied by a translation thereof into English certified (by an officer of the person making or delivering the same) as being a true and accurate translation thereof. -65- PART 18 LAW AND JURISDICTION 40. Law and Jurisdiction 40.1 Dutch Law This Agreement shall be governed by, and shall be construed in accordance with, laws of The Netherlands. 40.2 English Courts Each of the parties hereto irrevocably agrees for the benefit of each of the Agents, the Arrangers and the Banks that the courts of England shall have jurisdiction to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Agreement (respectively "Proceedings" and "Disputes") and, for such purposes, irrevocably submits to the jurisdiction of such courts. 40.3 Dutch Courts Each of the Obligors irrevocably agrees for the benefit of each of the Agents, the Arrangers and the Banks that the competent courts of Amsterdam, The Netherlands shall have jurisdiction to hear and determine any suit, action or Proceeding, and to settle any Disputes and, for such purposes, irrevocably submits to the jurisdiction of such courts. 40.4 New York Courts Each of the Obligors irrevocably agrees that the courts of the State of New York and the courts of the United States of America, in each case sitting in the County of New York, shall have jurisdiction to hear and determine any Proceedings and to settle any Disputes and, for such purposes, irrevocably submits to the jurisdiction of such courts. 40.5 Appropriate Forum Each of the Obligors irrevocably waives any objection which it might now or hereafter have to the courts referred to in Clause 40.2 (English Courts), Clause 40.3 (Dutch Courts) and Clause 40.3 (New York Courts) being nominated as the forum to hear and determine any Proceedings and to settle any Disputes and agrees not to claim that any such court is not a convenient or appropriate forum. 40.6 Service of Process Each of the Obligors agrees that the process by which any suit, action or proceeding is begun may be served on it by being delivered (i) in connection with any suit, action or proceeding in England, to Legibus Secretaries Limited at 200 Aldersgate Street, London EC1A 4JJ and (ii) in connection with any suit, action or proceeding in New York, to CT Corporation System at 1633 Broadway, New York N.Y. 10019, United States of America. If the appointment of the person mentioned in this Clause 40.6 ceases to be effective each Obligor shall immediately appoint a further person in England or, as the case may be, New York to accept service of process on its behalf in England or, as the case may be, New York and, failing such appointment within 15 days, the Facility Agent shall be entitled to appoint such a person by notice to such Obligor. Nothing contained herein shall affect the right to serve process in any other manner permitted by law. 40.7 Non-exclusive Submissions The submission to the jurisdiction of the courts referred to in Clause 40.2 (English Courts), Clause 40.3 (Dutch Courts) and Clause 40.4 (New York Courts) shall not (and shall not be construed so as to) limit the right of the Agents, the Arrangers and the Banks or any of them to take Proceedings against any of the Obligors in any other court of competent jurisdiction nor shall the taking of Proceedings in any one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction (whether concurrently or not) if and to the extent permitted by applicable law. 40.8 Consent to Enforcement Each of the Obligors hereby consents generally in respect of any Proceedings to the giving of any relief or the issue of any process in connection with such Proceedings including, without -66- limitation, the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order or judgment which may be made or given in such Proceedings. 40.9 Waiver of Immunity To the extent that any of the Obligors may in any jurisdiction claim for itself or its assets immunity from suit, execution, attachment (whether in aid of execution, before judgment or otherwise) or other legal process and to the extent that in any such jurisdiction there may be attributed to itself or its assets such immunity (whether or not claimed), such Obligor hereby irrevocably agrees and shall be obliged for the purposes of this Agreement not to claim and hereby irrevocably waives such immunity to the full extent permitted by the laws of such jurisdiction and, in particular, to the intent that in any Proceedings taken in New York the foregoing waiver of immunity shall have effect under and be construed in accordance with the United States Foreign Sovereign Immunities Act of 1976. AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written. -67- THE FIRST SCHEDULE The Banks Part 1 The Revolving Credit Banks Commitment ($) ABN AMRO Bank N.V. 61,000,000 The Chase Manhattan Bank 61,000,000 Morgan Guaranty Trust Company of New York 61,000,000 The First National Bank of Boston 57,000,000 Bayerische Landesbank International S.A. 57,000,000 Citibank N.A., Amsterdam Branch 57,000,000 Deutsche Bank AG 57,000,000 Fleet National Bank 57,000,000 Dai-Ichi Kangyo Bank Nederland N.V. 57,000,000 ING Bank N.V. 57,000,000 Rabobank International, Utrecht Branch 57,000,000 SBC 57,000,000 Union Bank of Switzerland 57,000,000 Westdeutsche Landesbank Girozentrale, London Branch 57,000,000 The Bank of New York 38,000,000 Banque Paribas Nederland N.V. 38,000,000 Barclays Bank plc (CLAD) UK 38,000,000 The First National Bank of Chicago 38,000,000 Kredietbank (Nederland) N.V. 38,000,000 -68- Part 2 The Swing-Line Banks Bank Commitment ($) ABN AMRO Bank N.V. 36,666,666.66 The Chase Manhattan Bank 36,666,666.66 Morgan Guaranty Trust Company of New York 36,666,666.66 The Bank of New York 30,000,000.00 Bayerische Landesbank Girozentrale, New York Branch 30,000,000.00 Union Bank of Switzerland 30,000,000.00 -69- THE SECOND SCHEDULE Form of Transfer Certificate To: The Chase Manhattan Bank TRANSFER CERTIFICATE relating to the agreement (as from time to time amended, varied, novated or supplemented, the "Facility Agreement") dated [ ] 199[ ] whereby a US$1,000,000,000 multicurrency revolving credit and short-term advances facility, a US$100,000,000 letter of credit facility and a US$200,000,000 swing- line facility was made available to Koninklijke Ahold N.V. and Ahold USA Holdings, Inc., as borrowers by a group of banks on whose behalf The Chase Manhattan Bank acted as Facility Agent in connection therewith. 1. Terms defined in the Facility Agreement shall, subject to any contrary indication, have the same meanings herein. The terms Bank and Transferee are defined in the schedule hereto. 2. The Bank (a) confirms that the details in the schedule hereto under the heading "Bank's Commitment", "Swing-Line Commitment", "Letter of Credit Commitment", "Relevant Revolving Credit Advance(s)" "Relevant Letters of Credit Issued", "Relevant Swing-Line Advance(s)", and "Relevant Short-Term Advances" accurately summarises its Commitment, its Swing-Line Commitment, and/or its Letter of Credit Commitment and/or, as the case may be, the Term and Repayment Date of one or more existing Advances or Letters of Credit made by it or in which it participates and (ii) requests the Transferee to accept and procure the transfer to the Transferee of the portion specified in the schedule hereto of, as the case may be, its Commitment, its Swing-Line Commitment, its Letter of Credit Commitment and/or such Advance(s) and/or participations by counter- signing and delivering this Transfer Certificate to the Facility Agent at its address for the service of notices specified in the Facility Agreement. 3. The Transferee hereby requests the Facility Agent to accept this Transfer Certificate as being delivered to the Facility Agent pursuant to and for the purposes of Clause 35.5 (Transfers by Banks) of the Facility Agreement so as to take effect in accordance with the terms thereof on the Transfer Date or on such later date as may be determined in accordance with the terms thereof. 4. The Transferee confirms that it has received a copy of the Facility Agreement together with such other information as it has required in connection with this transaction and that it has not relied and will not hereafter rely on the Bank to check or enquire on its behalf into the legality, validity, effectiveness, adequacy, accuracy or completeness of any such information and further agrees that it has not relied and will not rely on the Bank to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of any of the Borrowers. 5. The Transferee hereby undertakes with the Bank and each of the other parties to the Facility Agreement that it will perform in accordance with their terms all those obligations which by the terms of the Facility Agreement will be assumed by it after delivery of this Transfer Certificate to the Facility Agent and satisfaction of the conditions (if any) subject to which this Transfer Certificate is expressed to take effect. 6. The Bank makes no representation or warranty and assumes no responsibility with respect to the legality, validity, effectiveness, adequacy or enforceability of the Facility Agreement or any document relating thereto and assumes no responsibility for the financial condition of any of the Borrowers or for the performance and observance by such Borrower of any of its obligations under the Facility Agreement or any document relating -70- thereto and any and all such conditions and warranties, whether express or implied by law or otherwise, are hereby excluded. 7. The Bank hereby gives notice that nothing herein or in the Facility Agreement (or any document relating thereto) shall oblige the Bank to (a) accept a re-transfer from the Transferee of the whole or any part of its rights, benefits and/or obligations under the Facility Agreement transferred pursuant hereto or (b) support any losses directly or indirectly sustained or incurred by the Transferee for any reason whatsoever including the non-performance by any of the Borrowers or any other party to the Facility Agreement (or any document relating thereto) of its obligations under any such document. The Transferee hereby acknowledges the absence of any such obligation as is referred to in (a) or (b) above. 8. This Transfer Certificate and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with Dutch law. THE SCHEDULE 1. Bank: 2. Transferee: 3. Transfer Date: 4. Commitment: Bank's Commitment Portion Transferred Swing-Line Commitment Portion Transferred Letter of Credit Commitment Portion Transferred 5. Advance(s): Term and Repayment Date of Revolving Credit Advance(s) Portion Transferred Term and Repayment Date of Letters of Credit Portion Transferred Term and Repayment Date of Swing-Line Advances Portion Transferred Term and Repayment Date of Short-Term Advances Portion Transferred -71- [Transferor Bank] [Transferee Bank] By: By: Date: Date: [Facility Agent] as agent for and on behalf of the Borrower By: Date: Administrative Details of Transferee Address/Main Office: Contact name: Swing-Line Office: Letter of Credit Office: Short-Term Advances Office: Contact Name: Account for Payments in US Dollars: Telex: [ ] (Main office) [ ] (Swing-Line office) [ ] (Letter of Credit Office) [ ] (Short-Term Advances Office) Telephone:[ ] (Main office) [ ] (Swing-Line office) [ ] (Letter of Credit Office) [ ] (Short-Term Advances Office) Telefax: [ ] (Main office) [ ] (Swing-Line office) [ ] (Letter of Credit Office) [ ] (Short-Term Advances Office) -72- THE THIRD SCHEDULE Condition Precedent Documents 1. In relation to each of the Obligors: (a) a copy, certified a true copy by a duly authorised officer of such Obligor, of the constitutional documents of such Borrower and (in the case of the Principal Company) an extract from the relevant Chamber of Commerce; (b) a copy, certified a true copy by a duly authorised officer of such Obligor, of a board resolution of such Obligor and (in the case of the Principal Company) such resolutions of the board of managing directors of the Principal Company, the supervisory board of the Principal Company (Raad van Commissarissen) and the works' council of the Principal Company (Ondernemingsraad) as may be required by Dutch Counsel to the Banks approving the execution, delivery and performance of this Agreement and the terms and conditions hereof and authorising a named person or persons to sign this Agreement and any documents to be delivered by such Obligor pursuant hereto; and (c) a certificate of a duly authorised officer of such Obligor setting out the names and signatures of the persons authorised to sign, on behalf of such Obligor, this Agreement and any documents to be delivered by such Obligor pursuant hereto. 2. A copy, certified a true copy by or on behalf of the Principal Company, of each such law, decree, consent, licence, approval, registration or declaration as is, in the opinion of counsel to the Banks, necessary to render this Agreement legal, valid, binding and enforceable, to make this Agreement admissible in evidence in each Obligor's jurisdiction of incorporation and to enable each of the Obligors to perform its obligations hereunder. 3. An opinion of each of the Borrowers' in-house Dutch and United States Counsel in substantially the forms set out in the Eighth Schedule. 4. An opinion of Clifford Chance, solicitors to the Facility Agent, in substantially the form distributed to the Banks prior to the execution hereof. 5. A copy, certified a true copy by a duly authorised officer of each Borrower, of the Original Financial Statements of such Borrower. 6. Evidence that each of the process agents referred to in Clause 40.6 has agreed to act as the agent of the Obligors for the service of process in England and New York. 7. Evidence that the Existing Facilities shall be terminated and all outstandings thereunder shall be paid or repaid upon the making of the first Advance or issue of (or participation by a Bank in) the first Letter of Credit (whichever occurs first). -73- THE FOURTH SCHEDULE Utilisation Request From: [Name of Borrower] To: The Facility Agent [and the Multicurrency Facility Agent [delete if no Optional Currency is requested]* Dated: Dear Sirs, 1. We refer to the agreement (as from time to time amended, varied, novated or supplemented, the "Facility Agreement") dated [ ] 1996 and made between Koninklijke Ahold N.V., Ahold USA Holdings, Inc. as borrowers, ABN AMRO Bank N.V., The Chase Investment Bank Limited and J.P. Morgan Securities Ltd. as arrangers, The Chase Manhattan Bank as Facility, Letter of Credit, Swing-Line and Short-Term Advances Agent and Chase Manhattan International Limited as Multicurrency Facility Agent and the financial institutions named therein as banks. Terms defined in the Facility Agreement shall have the same meaning in this notice. [2. We hereby give you notice that, pursuant to the Facility Agreement, we wish the [Banks/Swing-Line Banks] to *[make Advances/Swing-Line Advances/make offers of Short-Term Advances] as follows: (a) Aggregate *[principal/face] amount: (b) Utilisation Date: (c) Term (specify number of business days for Swing-Line Advances or the number of months or business days for other Advances): (d) *[Repayment Date]:]* [2. We require [a Letter of Credit to be opened for our account/the Banks to participate in an Existing Letter of Credit]* under the Facility Agreement as follows: (a) Issue Date: [ ] (b) Tenor: [ ] (c) Amount: [ ] (d) Approved Beneficiary: [ ] (e) Concerning: [brief details of the purpose of the Letter of Credit].]* [3. If it is not possible, pursuant to Clause 3.3 (Banks' Agreement to Optional Currency) of the Facility Agreement, for the Advance to be made in the currency specified, we would wish the Advance to be denominated in dollars.]*[N.B: Only retain in case of Revolving Credit Advance requested in Optional Currency] [3./4. We confirm that, at the date hereof, the representations set out in Clause 23 of the Facility Agreement are true provided that each reference to "Original Financial Statements" therein shall be deemed to be a reference -74- to each most recent set of annual audited financial statements delivered by any Borrower to the Facility Agent pursuant to Clause 24. [4/5.] *[The proceeds of this Utilisation should be credited to [insert account details]]/[The Letter of Credit should be issued in favour of [name of recipient] in the form attached and delivered to the recipient at [address of recipient]]./1/ Yours faithfully ............................. for and on behalf of [NAME OF BORROWER] - -------------------------------------------------------------------------------- * Delete as appropriate - --------------- /1/ not applicable for Existing Letters of Credit -75- THE FIFTH SCHEDULE Material Subsidiaries Albert Heijn B.V. BI-LO, Inc. Giant Food Stores, Inc. Ahold Vastgoed B.V. Tops Markets, Inc. Schuitema N.V. The Stop & Shop Companies, Inc. -76- THE SIXTH SCHEDULE Existing Letters of Credit
Issue Date Issuer No. of Letter Outstanding ($) Expiry Date of Credit 09.10.89 The First National Bank of Chicago 31449901 30,686,000.00 01.11.97 20.06.95 The First National Bank of Chicago 31449912 396,395.21 30.10.98 01.08.95 The First National Bank of Chicago 31449914 830,400.00 01.08.97 16.02.96 The First National Bank of Chicago 31449919 385,908.00 16.02.97 11.03.96 The First National Bank of Chicago 31449920 1,750,000.00 11.02.97 15.10.96 The First National Bank of Chicago 31449921 1,074,073.00 15.10.97
-77- THE SEVENTH SCHEDULE Opinion of Borrowers' Netherlands and United States Counsel -78- THE EIGHTH SCHEDULE Supplemental Agreement for Additional Borrowers THIS SUPPLEMENTAL AGREEMENT is made on the day of , 19 BETWEEN: (1) KONINKLIJKE AHOLD N.V. (the "Principal Company"); (2) [Additional Borrower(s)] (the "Additional Borrower(s)"); and (3) [The Chase Manhattan Bank] on behalf of itself as facility agent and on behalf of the Arranger(s), the other Agents, the Banks and Swing-Line Banks. WHEREAS: (1) By an agreement (together with the supplemental agreements referred to in (2) below, the "Facility Agreement") dated [ ] 1996 and made between the Principal Company, Ahold USA, the Arrangers, the Agents and the Banks the Principal Company and Ahold USA were granted facilities in the maximum amount of $1,000,000,000. (2) The agreement referred to in (1) above has been supplemented by the following agreements: [List Supplemental Agreements] NOW IT IS HEREBY AGREED as follows: 1. Interpretation Save as otherwise defined herein, terms defined in the Facility Agreement shall bear the same meaning herein. 2. Additional Borrower(s) With effect as from the date that the Facility Agent confirms to the Principal Company that it has received, in form and substance satisfactory to it [in relation to each Additional Borrower], each of the conditions precedent documents specified in Clause 3, the Facility Agreement shall henceforth be read and construed as if the [each] Additional Borrower were party to the Facility Agreement having all the rights and obligations of an Additional Borrower and an Obligor. Accordingly all references in any Finance Document to (a) any "Additional Borrower" or "Obligor" shall be treated as including a reference to the [such] Additional Borrower and (b) the Facility Agreement shall be treated as a reference to the Facility Agreement as supplemented by this Agreement to the intent that this Agreement and the Facility Agreement shall be read and construed together as one single agreement. 3. Conditions Precedent The following are the conditions precedent referred to in Clause 2 which are required to be delivered to the Facility Agent in relation to the [each] Additional Borrower: -79- (a) a copy, certified a true and up-to-date copy by a duly authorised officer of the [such] Additional Borrower, of the Memorandum and Articles of Association [or other constitutional documents] of the [such] Additional Borrower together with its most recent audited annual financial statements; (b) a copy, certified a true copy by a duly authorised officer of the [such] Additional Borrower, of all corporate and other resolutions of the [such] Additional Borrower required for the approval of the execution, delivery and performance of this Agreement and the performance of the obligations to be assumed pursuant hereto by the [such] Additional Borrower under the Facility Agreement and authorising a named person or persons to sign this Agreement and any documents to be delivered by the [such] Additional Borrower pursuant hereto or thereto and to operate the Facilities on behalf of the [such] Additional Borrower; (c) a certificate of a duly authorised officer of the [such] Additional Borrower setting out the names and signatures of the persons authorised to sign, on behalf of the [such] Additional Borrower, this Agreement and any documents to be delivered by the [such] Additional Borrower pursuant hereto or to the Facility Agreement and a certificate as to the names of any persons authorised to give telex or telephone instructions in relation to the operation of the Facilities on behalf of the [such] Additional Borrower as contemplated by paragraph (b) above; (d) a copy, certified a true copy by a duly authorised officer of the [such] Additional Borrower, of each such law, decree, consent, licence, approval, registration or declaration as is necessary to render this Agreement and the Facility Agreement legal, valid and binding as against the [such] Additional Borrower in accordance with their respective terms, to make this Agreement and the Facility Agreement admissible in evidence against the [such] Additional Borrower in the [such] Additional Borrower's country of incorporation and to enable the [such] Additional Borrower to perform its obligations hereunder and thereunder; (e) a copy, certified a true and up-to-date copy by an Authorised Signatory of the Principal Company, of the Memorandum and Articles of Association of the Principal Company/a letter from an Authorised Signatory of the Principal Company confirming that there has been no change in the Memorandum and Articles of Association of the Principal Company since the same were last delivered to the Facility Agent; (f) a copy, certified a true copy by an Authorised Signatory of the Principal Company, of all resolutions required for the approval of the execution, delivery and performance of this Agreement and confirming that its board resolution referred to in paragraph 2 of the Third Schedule of the Facility Agreement has not been revoked, varied or amended; (g) written evidence that [ ] has agreed to act as the agent of the [such] Additional Borrower for the service of process in England and that [ ] has agreed to act as the agent of the [such] Additional Borrower for the service of process in New York; (h) an opinion of counsel to the Facility Agent and the Banks, in a form satisfactory to them; -80- (i) an opinion of counsel to the Additional Borrower, in a form satisfactory to the Facility Agent and the Banks; (j) written evidence of the consent of the Facility Agent and the Banks to the [such] Additional Borrower being designated by the Principal Company as such; and (k) if requested by the Facility Agent, on the basis of regulations applicable to any Bank requiring the provision of financial information, the most recent added financial statements or written confirmation than there is no requirement to produce such statements. 4. Representations The [Each] Additional Borrower hereby represents as if the representations set out in Clause 23 of the Facility Agreement were set out in full in this Agreement. 5. Covenant To the extent that any Bank shall have to comply with any regulations imposed on it in relation to the provision of financial information by the Additional Borrower, the Additional Borrower shall supply the Facility Agent with its most recent audited consolidated financial statement or if such statement do not exist then the Additional Borrower shall supply the Facility Agent with written confirmation stating that it is not required to produce such statements. 6. Counterparts This Agreement may be signed in counterparts, all of which taken together shall constitute a single agreement. 7. Law This Agreement shall be governed by, and construed in accordance with, Dutch law. AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written. -81- [NAME OF ADDITIONAL BORROWER] By : Address : -82- The Obligors KONINKLIJKE AHOLD N.V. By: Address: Albert Heijnweg 1 1507 EH Zaandam The Netherlands Attention: Norbert Berger / Paul Freischlag Telephone: 31 75 595795 Fax: 31 75 598355 AHOLD USA HOLDINGS, INC. By: Address: One Atlanta Plaza, Suite 2575 950 East Paces Ferry Road 30326 Atlanta, Georgia United States of America Attention: Joseph Harber Telephone: 1 404 262 6050 Fax: 1 404 262 6051 The Arrangers ABN AMRO BANK N.V. By: Address: P.O. Box 283 1000 EA Amsterdam The Netherlands -83- CHASE INVESTMENT BANK LIMITED By: Address: 125 London Wall London EC2Y 5AJ United Kingdom J.P. MORGAN SECURITIES LTD. By: Address: 60 Victoria Embankment London EC4Y 0JP United Kingdom The Agents THE CHASE MANHATTAN BANK By: Address: 270 Park Avenue New York, NY 10081 United States of America Attention: Hilma Gabbidon Telephone: 1 212 552 4650 Telefax: 1 212 552 5658 CHASE MANHATTAN INTERNATIONAL LIMITED By: Address: Trinity Tower 9 Thomas More Street London E1 9YT United Kingdom Attention: Steve Horford Telephone: 44 171 777 2847 Telefax: 44 171 777 2085 -84- The Banks ABN AMRO BANK N.V. By: Address: Foreign Credit Services/AA4130 P.O. Box 283 1000 EA Amsterdam The Netherlands Attention: Ruud Farenhorst / Agnes Knigge-Dekker / Jim Fraeyhoven / Maartje Kuit Telephone: 31 20 628 7392 / 31 20 628 4367 / 31 20 628 7423 / 31 20 628 6450 Telefax: 31 20 628 1286 For Swing-Line Advances Address. 500 Park Avenue New York, NY 10022 United States of America Attention: Doreen Yip / Barbara Tsiakaros Telephone: 1 212 754 6114 Telefax: 1 212 446 4155 THE CHASE MANHATTAN BANK By: Address: European Loan Services 125 London Wall London EC2Y 5AJ United Kingdom Attention: Nick Gittins / Tina Holes, European Loan Services Telephone: 1 202 34 3923/2020 Telefax: 1 202 34 3730 -85- With a copy to: Attention: Anne Whittaker, Transaction Management Telefax: 44 171 962 3611 For Swing-Line Advances Address: 270 Park Avenue New York, NY 10081 United States of America Attention: Hilma Gabbidon Telephone: 1 212 552 4650 Telefax: 1 212 552 5658 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: Address: 60 Victoria Embankment London EC4Y O5P United Kingdom Attention: Alex Cornwell / Ray Mayers, Global Credit Telephone: 44 171 325 5291 / 44 171 325 5245 Telefax: 44 171 325 8190 / 44 171 325 8217 For Swingline Advances Address: J.P. Morgan Services Inc. 500 Stanton Christiana Road Newark, Delaware 19713 United States of America Attention: Donna Davis / Kendal Hinmon, IBG Operations Telephone: 1 302 634 1860 Telefax: 1 302 634 4267 -86- THE FIRST NATIONAL BANK OF BOSTON By: Address: 100 Federal Street/MS-01-09-04 Boston, Mass. 02110 United States of America Attention: Susan Santos Telephone: 1 617 434 3496 Telefax: 1 617 434 0637 For Short Term Advances Address: 100 Federal Street/MS-01-12-07 Boston, Mass. 02110 United States of America Attention: Larry Faccini Telephone: 1 617 434 7725 Telefax: 1 617 434 4695 For Letters of Credit Address: 150 Federal Street/MS-50-04-01 Boston, Mass. 02110 United States of America Attention: Dawn Trench Telephone: 1 617 434 5874 Telefax: 1 617 434 1202 For Advances in a Multicurrency Address: 100 Rustcraft Rd/MS-74-02-02D Dedham, Mass. 02026 United States of America Attention: Cheryl Troy Telephone: 1 617 434 2087 -87- Telefax: 1 617 434 2094 BAYERISCHE LANDESBANK INTERNATIONAL S.A. By: Address: 3, rue Jean Monnet L-2180 Luxembourg Luxembourg Attention: Mr. P. Lang Telephone: 352 42434 3325 Telefax: 352 42434 3399 For Letters of Credit, Short-Term Advances and Swing-Line Advances Address: Bayerische Landesbank Girozentrale, New York Branch 560 Lexington Avenue New York, NY 10022 United States of America Attention: Ms. Patricia Sanchez Telephone: 1 212 310 9810 Telefax: 1 212 310 9930 CITIBANK, N.A., AMSTERDAM BRANCH By: Address: "Europlaza" Hoogoorddreef 54 B 1101 BE Amsterdam Z.O. The Netherlands Attention: Mr. Hans P. Verdoes Telephone: 31 20 6514 394 Telefax: 31 20 6514 292 For Short-Term Advances and Letters of Credit Address: Citibank, N.A. -88- One Court Square, 7th Floor Long Island City, NY 11120 United States of America Attention: Mrs. Stephanie Tackore, Manager Telephone: 1 718 248 3596 Telefax: 1 718 248 7393 DEUTSCHE BANK AG By: Address: Deutsche Bank de Bary N.V. FX/MM Settlements Herengracht 450 1017 CA Amsterdam The Netherlands Attention: C. Spaans Telephone: 31 20 555 4202 Telefax: 31 20 555 4428 For Swing-Line Advances Address: 31 West 52nd Street New York, NY 10019 United States of America Attention: Babara Hoeltz Telephone: 1 212 469 8121 Telefax: 1 212 469 8115 -89- FLEET NATIONAL BANK By: Address: One Federal Street Boston, MA 02211 United States of America Attention: Fancia Castillo, National Banking Telephone: 1 617 346 5635 Telefax: 1 617 346 0595 For Advances in a Multicurrency Attention: Gordon Kilby Telephone: 44 171 248 9531 Telefax: 44 171 334 9456 DAI-ICHI KANGYO BANK NEDERLAND N.V. By: Address: Apollolaan 171 1077 AS Amsterdam The Netherlands Attention: Mr. Joost van Leeuwen Telephone: 31 20 5740200 Telefax: 31 20 6760301 ING BANK N.V. By: Address: De Weer 75 P.O. Box 48 1500 EA Zaandam The Netherlands Attention: Mr. M.H. van Doorn / Mr. G.J. Bakker Telephone: 31 75 681 1335 -90- Telefax: 31 75 612 3007 RABOBANK INTERNATIONAL, UTRECHT BRANCH By: Address: Croeselaan 18 P.O. Box 17100 3500 HG Utrecht The Netherlands Attention: Mr. Richard Polkerman, BOF / Loan Administration Telephone: 31 30 216 3445 Telefax: 31 30 216 2767 For Letters of Credit and Short-Term Advances Address: 1201 West Peachtree Street N.W. Atlanta, GA 30309 United States of America Attention: Telephone: 1 404 881 4050 Telefax: 1 404 881 4777 SBC By: Address: 1 High Timber Street London EC4V 3SB United Kingdom Attention: Paul Hardy, Associate Director, Treasury Customer Desk Telephone: 44 171 329 0201 Telefax: 44 171 711 3861 For Advances to Ahold USA Address: Swiss Bank Corporation 222 Broadway, 2nd Floor New York, NY 10038 United States of America -91- Attention: Marisa Reonegro, Banking Finance Support Telephone: 1 212 574 6241 Telefax: 1 212 574 5248 UNION BANK OF SWITZERLAND By: Address: Bahnhofstrasse 45 8021 Zurich Switzerland Attention: Claude Aklin, Assistant Vice President, Ref.: KABI-AKC Telephone: 41 1 235 69 79 / 41 1 235 33 73 Telefax: 41 1 235 32 68 For Swing-Line Advances Address: 299 Park Avenue New York, NY 10171 United States of America Attention: Douglas Edwards Telephone: 1 212 821 3628 Telefax: 1 212 821 3878 -92- WESTDEUTSCHE LANDESBANK GIROZENTRALE, LONDON BRANCH By: Address: 51 Moorgate London EC2R 6AE United Kingdom Attention: Mr. Stewart Nutt Telephone: 44 171 4572116 Telefax: 44 171 374 8546 THE BANK OF NEW YORK By: For Letters of Credit and Swing-Line Advances Address: One Wall Street, 22nd Floor New York, NY 10286 United States of America Attention: Patricia Botler / Terry Blackborn Telephone: 1 212 635 6732 Telefax: 1 212 635 6397 For Short-Term Advances Address: 48 Wall Street, 13th Floor New York, NY 10005 United States of America Attention: Wilson Mastrandrea Telephone: 1 212 804 2050 Telefax: 1 212 809 5272 -93- BANQUE PARIBAS NEDERLAND N.V. By: Address: Herengracht 527 P.O. Box 2171 1000 CD Amsterdam The Netherlands Attention: Ms. R. van de Vondervoort / Mr. J. de Wild Telephone: 31 20 520 4400 Telefax: 31 20 620 1623 BARCLAYS BANK PLC (CLAD) UK By: Address: 5th Floor St. Swithin's House 11-12 St. Swithin's Lane London EC4N 8AS United Kingdom Attention: Sharon Carter Telephone: 44 171 621 4000 Telefax: 44 171 621 4583 With a copy to: Address: Atrium, Strawinskylaan 3053 1077 ZX Amsterdam The Netherlands Attention: Victor J. van der Linden Telephone: 31 20 5045 338 Telefax: 31 20 5045 339 -94- THE FIRST NATIONAL BANK OF CHICAGO By: Address: First Chicago House 90 Long Acre London WC2E 9RB United Kingdom Attention: Dot O'Flaherty Telephone: 44 171 438 4150 Telefax: 44 171 438 4148 For Letters of Credit Address: The First National Bank of Chicago 300 S.Riverside Suite 0236-7th Floor Chicago, Illinois United States of America Attention: Louis Virgo, Operations Officer Telephone: 1 312 954 1928 Telefax: 1 312 954 1963 / 001 312 954 1964 KREDIETBANK (NEDERLAND) N.V. By: Address: Westersingel 88 3015 LC Rotterdam The Netherlands Attention: Mr. H. Langstraat Telephone: 31 10 43 68 399 Telefax: 31 10 43 66 335 -95- EX-99.(C)(1) 11 CONFIDENTIALITY LETTER AGMT. 12/30/98 EXHIBIT (C)(1) SMG-II HOLDINGS CORPORTION ================================================================================ 200 MILIK STREET, CARTERET, NJ 07008 (732) 499-3930 FAX: (732) 499-3460 December 30, 1998 Mr. Robert Tobin, Member of the Executive Board Koninklijke Ahold nv One Atlanta Plaza 950 E. Paces Ferry Road Suite 2575 Atlanta, Georgia 30326 Dear Mr. Tobin: In connection with your consideration of a possible negotiated transaction (the "Proposed Acquisition") with SMG-II Holdings Corporation and/or its subsidiaries which currently consist of Supermarket General Holdings Corporation, PTK Holdings, Inc. and Pathmark Stores, Inc. (collectively, with such subsidiaries, the "Company"), the Company is prepared to deliver to you upon your execution and delivery to us of this letter agreement, certain information about the business, financial condition, properties and operations of the Company. All information about the Company furnished by the Company or our representatives (as defined below), whether furnished before or after the date hereof, whether oral or written, and regardless of the manner in which it is furnished, is referred to in this letter agreement as "Proprietary Information". Proprietary Information does not include, however, information which (a) is or becomes generally available to the public other than as a result of a disclosure by you or your Representatives, (b) was available to you on a nonconfidential basis prior to its disclosure by us or our Representatives, (c) becomes available to you on a nonconfidential basis from a person other than us or our Representatives who is not otherwise bound by a confidentially agreement with us, or any Representative of ours, or is not otherwise under an obligation (contractual, legal or fiduciary) to us or any Representative of ours not to transmit the information to you, or (d) has been, or hereinafter is, independently acquired or developed by you without violation of any of your obligations under this confidentiality agreement. As used in this letter, the term "person" shall be broadly interpreted to include, without limitation, any corporation, company, partnership and individual. As used in this letter agreement, "Representative" means, as to any person, such person's affiliates and its and their directors, officers, employees, partners, members, agents, advisors(including, without Mr. Robert Tobin, Member of the Executive Board Koninklijke Ahold nv c/o Ahold USA, Inc. December 30, 1998 Page 2 Limitations, financial advisors, lenders, underwriters, counsel and accountants), consultants and controlling persons. Subject to the immediately succeeding paragraph, unless otherwise agreed to in writing by us, you agree (a) except as required by law, to keep all Proprietary Information confidential and not to disclose or reveal any Proprietary Information to any person other than your Representatives who are actively and directly participating in your evaluation of the Proposed Acquisition, or who otherwise need to know the Proprietary Information for the purpose of evaluating the Proposed Acquisition and to cause those persons to observe the terms of this letter agreement, (b) not to use the Proprietary Information for any purpose other than in connection with your evaluation of the Proposed Acquisition or the consummation of the Proposed Acquisition in a manner that we have approved, and (c) except as required by law, not to disclose to any person(other than those of your Representatives who are actively and directly participating in your evaluation of the Proposed Acquisition or who otherwise need to know for the purpose of evaluating the Proposed Acquisition and, in the case of your Representatives, whom you will cause to observe the terms of this letter agreement) any information about the Proposed Acquisition, or the terms or conditions, or any other facts relating thereto, including without limitation, the fact that discussions are taking place with respect thereto or the status thereof, or the fact that Proprietary Information has been made available to you or your Representatives. You will be responsible for any breach of the terms of this letter agreement by you or your Representative. In the event that you or your Representatives are requested pursuant to, or required by, applicable law or regulation, or by legal process to disclose any Proprietary Information or any other information concerning the Company or the Proposed Acquisition, you agree that you or your Representatives will provide us with prompt written notice of such request or requirement in order to enable us to seek an appropriate protective order or other remedy, to consult with you or your Representatives with respect to our taking steps to resist or narrow the scope of such request or legal process, or to waive compliance, in whole or in part, with the terms of this letter agreement, provided that, in any event, you may comply with such requests as required by law immediately prior to the expiration date of such legal process unless a protective order has been granted. In any such event, you or our Representatives will use your reasonable best efforts to cooperate with us to ensure Mr. Robert Tobin, Member of the Executive Board Koninklijke Ahold nv c/o Ahold USA, Inc. December 30, 1998 Page 3 that all Proprietary Information and other information that is so disclosed will be accorded confidential treatment. If you determine that you do not wish to proceed with a Proposed Acquisition, you will promptly advise us of that decision. In that case, or in the event that we, in our sole discretion, so request or the Proposed Acquisition is not consummated by you, you will, upon our request, promptly deliver to us all of the Proprietary Information, including all copies, reproductions, summaries, analyses or extracts thereof or based thereon in your possession or in the possession of any of your Representatives. You acknowledge that none of the Company, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("ML"), Stonington Partners, Inc. ("SPI") or our other Representatives, and none of the respective directors, officers, employees, affiliates, agents, financial advisors or controlling persons of the Company, ML, SPI or our other Representatives make any express or implied representation or warranty as to the accuracy or completeness of any Proprietary Information, and you agree that none of such persons shall have any liability to you or to any of your Representatives relating to or arising from your or their use of any Proprietary Information or for any errors therein or omissions therefrom, provided, however, that such entities as listed above shall endeavor to ensure the accuracy of such Proprietary Information. You also agree that you are not entitled to rely on the accuracy or completeness of any Proprietary Information and that you shall be entitled to rely solely on such representations and warranties regarding Proprietary Information as may be made to you in any final acquisition agreement relating to the Proposed Acquisition, subject to the terms and conditions of such agreement. You agree that, without our written consent, you will not, for a period of nine months from the date hereof, directly or indirectly solicit for employment or employ any person who is now employed by the Company or any of our subsidiaries listed in paragraph 1 and who is identified by you as a result of your evaluation in connection with the Proposed Acquisition, provided, however, that you shall no be prohibited from (i) employing any such person who contacts you on his or her own initiative and without any direct or indirect solicitation by you, and (ii) making generalized searches for employees by use of advertisements or regular executive searches in the media which are not targeted specifically at employees of the Company. Mr. Robert Tobin, Member of the Executive Board Koninklijke Ahold nv c/o Ahold USA, Inc. December 30, 1998 Page 4 You agree that until a final definitive acquisition agreement regarding the Proposed Acquisition has been executed by you and the Company, neither the Company nor any of its Representatives is under any legal obligation, and shall have no liability to you of any nature whatsoever with respect to te Proposed Acquisition by virtue of this letter agreement. You also acknowledge and agree that (i) we and our Representatives may conduct the process that may or may not result in the Proposed Acquisition in such manner as we, in our sole discretion, may determine (including without limitation, negotiating and entering into a final acquisition agreement with any third party without notice to you), and (ii) we reserve the right to change (in our sole discretion, at any time and without notice to you) the procedures relating to our and your consideration of the Proposed Acquisition (including, without limitation, terminating all further discussions with you and requesting that you return all Proprietary Information to us). Without prejudice to the rights and remedies otherwise available to us, we shall be entitled to equitable relief by way of injunction if you or any of our Representatives breach or threaten to breach any of the provisions of the letter agreement. It is understood and agreed that no failure or delay by us 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 future exercise thereof or the exercise of any other right, power or privilege hereunder. This letter agreement shall be governed by, and construed in accordance with the laws of the State of New York. Any assignment of this letter agreement by you without our prior written consent shall terminate and shall be void. This letter agreement shall terminate and shall be null and void and of no further force and effect on and after the second anniversary of the date hereof. This letter contains the entire agreement between you and us concerning confidentiality of the Proprietary Information and no modification of this letter or waiver of the terms and conditions hereof shall be binding upon you or us, unless approved in writing by each of you and us. Mr. Robert Tobin, Member of the Executive Board Koninklijke Ahold nv c/o Ahold USA, Inc. December 30, 1998 Page 5 It is understood and agreed that this confidentiality agreement shall not in any manner be interpreted to restrict you from competing with the Company in the ordinary and customary course of business. Please confirm your agreement with the foregoing by signing and returning the duplicate copy of this letter, enclosed herewith, to me at the above address. Very truly yours, SMG-II HOLDINGS CORPORATION By: /s/ Marc A. Strassler ----------------------------- Marc A. Strassler Senior Vice President, and General Counsel Accepted and Agreed as of the date first above written: KONINKLIJKE AHOLD NV By: /s/ Robert Tobin ----------------------------- Robert Tobin Member of the Executive Board EX-99.(C)(2) 12 STOCKHOLDERS AGREEMENT DATED 03/09/99 Exhibit (c)(2) EXECUTION COPY -------------- ================================================================================ STOCKHOLDERS AGREEMENT BY AND AMONG KONINKLIJKE AHOLD N.V., AHOLD ACQUISITION, INC. AND THE STOCKHOLDERS LISTED ON EXHIBIT 1 HERETO Dated as of March 9, 1999 ================================================================================ TABLE OF CONTENTS -----------------
Page ---- 1. Definitions..............................................................................................1 2. Provisions Concerning Company Stock......................................................................1 3. Purchase Right...........................................................................................2 4. Representations and Warranties of the Stockholders.......................................................3 (a) Ownership of Shares.............................................................................3 (b) Power; Binding Agreement........................................................................3 (c) No Conflicts....................................................................................3 (d) No Finder's Fees................................................................................3 (e) No Encumbrances.................................................................................4 (f) Reliance by Parent..............................................................................4 5. Representations and Warranties of Parent and Sub.........................................................4 (a) Due Organization, etc...........................................................................4 (b) No Conflicts....................................................................................4 (c) Investment Intent...............................................................................4 6. Covenants of the Stockholders............................................................................5 (a) No Solicitation.................................................................................5 (b) Restriction on Transfer, Proxies and Non-Interference...........................................5 (c) Waiver of Appraisal Rights......................................................................5 (d) Stop Transfer; Changes in Shares................................................................5 7. Fiduciary Duties.........................................................................................6 8. Miscellaneous............................................................................................6 (a) Further Assurances..............................................................................6 (b) Entire Agreement................................................................................6 (c) Certain Events..................................................................................6 (d) Assignment......................................................................................6 (e) Amendments, Waivers, Etc........................................................................6 (f) Notices.........................................................................................6 (g) Severability....................................................................................8 (h) Specific Performance............................................................................8 (i) Remedies Cumulative.............................................................................8
(i) (j) No Waiver.......................................................................................8 (k) No Third Party Beneficiaries....................................................................8 (l) Governing Law...................................................................................8 (m) Submission to Jurisdiction; Waiver of Jury Trial................................................8 (n) Descriptive Headings............................................................................9 (o) Counterparts....................................................................................9 9. Termination..............................................................................................9 10. Limited Liability of Partners...................................................................9
(ii) STOCKHOLDERS AGREEMENT STOCKHOLDERS AGREEMENT (this "Agreement") dated as of March 9, 1999, among KONINKLIJKE AHOLD N.V., a company organized under the laws of The Netherlands ("Parent"), AHOLD ACQUISITION, INC., a company organized under the laws of Delaware and an indirect wholly owned subsidiary of Parent ("Sub"), and the other parties signatory hereto (individually, a Stockholder and, collectively, the "Stockholders"). W I T N E S S E T H: ------------------- WHEREAS, prior to entering into this Agreement, Parent, Sub and SMG-II Holdings Corporation, a company organized under the laws of Delaware (the "Company"), entered into an Agreement and Plan of Merger (such agreement, the "Merger Agreement"), pursuant to which Sub will be merged with and into the Company (the "Merger"); and WHEREAS, as an inducement and a condition to entering into the Merger Agreement, Parent has required that the Stockholders agree, and the Stockholders have agreed, to enter into this Agreement; NOW, THEREFORE, in consideration of the foregoing and the mutual premises, representations, warranties, covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Definitions. For purposes of this Agreement: ----------- (a) "Company Stock" shall mean, collectively, each of the Class A Common Stock, par value $0.01 per share, of the Company, the Class B Common Stock, par value $0.01 per share, of the Company, the Series A Preferred Stock, par value $0.01 per share, of the Company, the Series B Preferred Stock par value $0.01 per share, of the Company and the Series C Preferred Stock, par value $0.01 per share, of the Company. (b) Capitalized terms used and not defined herein have the respective meanings ascribed to them in the Merger Agreement. 2. Provisions Concerning Company Stock. Each Stockholder hereby ----------------------------------- agrees that during the period commencing on the date hereof and continuing until the first to occur of (i) the Effective Time, (ii) the last date the Stock Option is exercisable pursuant to Section 3 and (iii) the termination date set forth in Section 9, at any meeting of the holders of any class or classes of Company Stock, however called, or in connection with any written consent of the holders of any class or classes of Company Stock, such Stockholder shall vote (or cause to be voted) the number of shares of Company Stock set forth opposite such Stockholder's name on Exhibit I hereto (the "Existing Shares" and, together with any shares of Company Stock acquired by such Stockholder after the date hereof and prior to the termination of this Agreement whether upon the exercise of options, warrants or rights, the conversion or exchange of convertible or exchangeable securities, or by means of purchase, dividend, distribution or otherwise and acquired by such Stockholder solely in its capacity as a stockholder, such shares, with respect to such Stockholder or any of its transferees, the "Shares"), and any other shares of Company Stock owned by such Stockholder whether issued, heretofore owned or hereafter acquired, (x) in favor of the Merger, and the approval of the terms of the Merger Agreement and each of the other transactions contemplated by the Merger Agreement and this Agreement and any actions required in furtherance thereof; (y) against any action, transaction or agreement that would result in a breach in any respect of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement or this Agreement; and (z) except as otherwise agreed to in writing in advance by Parent, against the following actions (other than the Merger and the transactions contemplated by the Merger Agreement): (A) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company or any of its subsidiaries; (B) a sale, lease or transfer of a material amount of assets of the Company or any of its subsidiaries, or a reorganization, recapitalization, dissolution or liquidation of the Company or any of its subsidiaries; (C) (1) any change in a majority of the Persons who constitute the board of directors of the Company; (2) any change in the present capitalization of the Company or any amendment of Company's Certificate of Incorporation or By-laws; (3) any other material change in the Company's corporate structure or business; or (4) any other action involving the Company or any of its subsidiaries which is intended, or could reasonably be expected, to impede, interfere with, delay, postpone, or materially adversely affect the Merger and the transactions contemplated by this Agreement and the Merger Agreement. None of the Stockholders shall enter into any agreement or understanding with any Person the effect of which would be to violate the provisions and agreements contained in this Section 2. 3. Purchase Right. Each Stockholder hereby grants to Sub an -------------- irrevocable option (the "Stock Option") to purchase the Shares at a purchase price (the "Purchase Price") equal to the Applicable Merger Consideration until the termination date set forth in Section 9. Until the termination date set forth in Section 9, if the Merger Agreement is terminated in accordance with its terms (other than as a result of a material breach of any representation, warranty, obligation, covenant, agreement or condition of the Merger Agreement by Parent or Sub), the Stock Option shall become exercisable, in whole but not in part, and remain exercisable until the date which is 60 days after the date of the termination of the Merger Agreement, but shall not be exercisable in each case unless: (x) all waiting periods under the HSR Act, required for the purchase of Stock Option upon such exercise shall have expired or been waived, and (y) there shall not then be in effect any preliminary or final injunction or other order issued by any court or governmental, administrative or regulatory agency or authority prohibiting the exercise of the Stock Option pursuant to this Agreement. Provided that this Agreement has not been terminated, in the event that the Stock Option is not exercisable because the circumstances described in clauses (x) and (y) do not exist, then the Stock Option shall be exercisable for the 60 day period commencing on the date that the circumstances set forth in clauses (x) and (y) do exist. In the event that Parent wishes to exercise the Stock Option, Parent shall send a written notice to each Stockholder identifying the place for the closing of such purchase at least three business days prior to such closing. -2- 4. Representations and Warranties of the Stockholders. Each -------------------------------------------------- Stockholder hereby represents and warrants to Parent as follows: (a) Ownership of Shares. Such Stockholder is the record and ------------------- beneficial owner of the number and class of Existing Shares set forth opposite such Stockholder's name on Schedule I hereto. Such Stockholder has sole voting power and sole power to issue instructions with respect to the matters set forth in Sections 2 and 3 hereof, sole power of disposition, sole power of conversion, sole power to demand appraisal rights and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Existing Shares set forth opposite Stockholder's name on Schedule I hereto, with no limitations, qualifications or restrictions on such rights, subject to applicable securities laws and the terms of this Agreement. (b) Power; Binding Agreement. Such Stockholder has the legal ------------------------ capacity, power and authority to enter into and perform all of such Stockholder's obligations under this Agreement. The execution, delivery and performance of this Agreement by such Stockholder will not violate any other agreement to which such Stockholder is a party including, without limitation, any voting agreement, stockholders agreement or voting trust. This Agreement has been duly and validly executed and delivered by such Stockholder and constitutes a valid and binding agreement of such Stockholder, enforceable against such Stockholder in accordance with its terms. There is no beneficiary or holder of a voting trust certificate or other interest of any trust of which such Stockholder is trustee whose consent is required for the execution and delivery of this Agreement or the consummation by such Stockholder of the transactions contemplated hereby. (c) No Conflicts. Except for (i) filings and approvals under the HSR ------------ Act or the Antitrust Laws, if applicable, (A) no filing with, and no permit, authorization, consent or approval of, any state or federal public body or authority is necessary for the execution of this Agreement by such Stockholder and the consummation by such Stockholder of the transactions contemplated hereby and (B) none of the execution and delivery of this Agreement by such Stockholder, the consummation by such Stockholder of the transactions contemplated hereby or compliance by such Stockholder with any of the provisions hereof shall (1) conflict with or result in any breach of any applicable organizational documents applicable to such Stockholder, (2) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, material modification or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which such Stockholder is a party or by which such Stockholder or any of such Stockholder's properties or assets may be bound, or (3) violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to such Stockholder or any of such Stockholder's properties or assets. (d) No Finder's Fees. Except as disclosed pursuant to the Merger ---------------- Agreement, no broker, investment banker, financial advisor or other person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of such Stockholder. -3- (e) No Encumbrances. The Shares of such Stockholder and the --------------- certificates representing the Shares of such Stockholder are now, and at all times during the term hereof will be, held by such Stockholder, or by a nominee or custodian for the benefit of such Stockholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any such encumbrances or proxies arising hereunder. The transfer by such Stockholder of the Shares of such Stockholder to Sub hereunder shall pass to and unconditionally vest in Sub good and valid title to all Shares, free and clear of all claims, liens, restrictions, security interests, pledges, limitations and encumbrances whatsoever, other than any such encumbrances created by Sub. (f) Reliance by Parent. Such Stockholder understands and acknowledges ------------------ that Parent is entering into, and causing Sub to enter into, the Merger Agreement in reliance upon such Stockholder's execution and delivery of this Agreement. 5. Representations and Warranties of Parent and Sub. Parent and Sub ------------------------------------------------ hereby represent and warrant to each Stockholder as follows: (a) Due Organization, etc. Each of Parent and Sub is a corporation ---------------------- duly organized and validly existing under the laws of the jurisdiction of its incorporation. Each of Parent and Sub has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Parent and Sub have been duly authorized by all necessary corporate action on the part of Parent and Sub and, assuming its due authorization, execution and delivery by each Stockholder, constitutes a legal, valid and binding obligation of each of Parent and Sub, enforceable against each of Parent and Sub in accordance with its terms. (b) No Conflicts. Except for (i) filings and approvals under the HSR ------------ Act or the Antitrust Laws, if applicable, (A) no filing with, and no permit, authorization, consent or approval of, any state or federal public body or authority is necessary for the execution of this Agreement by Parent and Sub and the consummation by Parent and Sub of the transactions contemplated hereby and (B) none of the execution and delivery of this Agreement by Parent or Sub, the consummation by Parent and Sub of the transactions contemplated hereby shall (1) conflict with or result in any breach of the organizational documents of Parent or Sub, (2) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, material modification or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which Parent or Sub is a party or by which Parent or Sub or any of their respective properties or assets may be bound, or (3) violate any order, writ, injunction, decree, judgment, order, statute, rule or regulation applicable to Parent or Sub or any of their respective properties or assets. (c) Investment Intent. The purchase of Shares from the Stockholders ----------------- pursuant to this Agreement is for the account of Sub for the purpose of investment and not with a view to -4- or for sale in connection with any distribution thereof within the meaning of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. 6. Covenants of the Stockholders. Each Stockholder covenants and ----------------------------- agrees as follows: (a) No Solicitation. Beginning on the date hereof and ending on the --------------- last date the Stock Option is exercisable pursuant to Section 3 hereof, such Stockholder shall not, in its capacity as such, directly or indirectly, initiate, solicit (including by way of furnishing information), encourage or respond to or take any other action knowingly to facilitate, any inquiries or the making of any proposal by any Person (other than Parent or any affiliate of Parent) with respect to the Company that constitutes or reasonably may be expected to lead to, an Acquisition Proposal, or enter into or maintain or continue discussions or negotiate with any Person in furtherance of such inquiries or to obtain any Acquisition Proposal, or agree to or endorse any Acquisition Proposal, or authorize or permit any Person acting on behalf of the Stockholder to do any of the foregoing. If the Stockholder receives any inquiry or proposal regarding any Acquisition Proposal, the Stockholder shall promptly inform Parent of that inquiry or proposal and the details thereof. (b) Restriction on Transfer, Proxies and Non-Interference. Beginning ----------------------------------------------------- on the date hereof and ending on the last date the Stock Option is exercisable pursuant to Section 3 hereof, such Stockholder shall not (i) directly or indirectly, offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to or consent to the offer for sale, transfer, tender, pledge, encumbrance, assignment or other disposition of, any or all of the Shares of such Stockholder or any interest therein; (ii) except as contemplated by this Agreement, grant any proxies or powers of attorney, deposit any Shares of such Stockholder into a voting trust or enter into a voting agreement with respect to any Shares; or (iii) take any action that would make any representation or warranty of such Stockholder contained herein untrue or incorrect or have the effect of preventing or disabling such Stockholder from performing such Stockholder's obligations under this Agreement. (c) Waiver of Appraisal Rights. Such Stockholder hereby irrevocably -------------------------- waives any rights of appraisal or rights to dissent from the Merger that such Stockholder may have. (d) Stop Transfer; Changes in Shares. Such Stockholder agrees with, -------------------------------- and covenants to, Parent that such Stockholder shall not request that the Company register the transfer (book-entry or otherwise) of any certificate or uncertificated interest representing any of the Shares of such Stockholder, unless such transfer is made in compliance with this Agreement. In the event of a stock dividend or distribution, or any change in any class of Company Stock by reason of any stock dividend, split-up, recapitalization, combination, exchange of shares or the like, the term "Shares" shall be deemed to refer to and include the Shares of such Shareholder as well as all such stock dividends and distributions and any shares into which or for which any or all of the Shares of such Stockholder may be changed or exchanged and the Purchase Price shall be appropriately adjusted. Such Stockholder shall be entitled to receive any cash dividend paid by -5- the Company in respect of the Shares of such Stockholder during the term of this Agreement until the Effective Time or purchased hereunder. 7. Fiduciary Duties. Notwithstanding anything in this Agreement to ---------------- the contrary, the covenants and agreements set forth herein shall not prevent any of the Stockholder's designees serving on the Company's Board of Directors from taking any action, subject to the applicable provisions of the Merger Agreement, while acting in the capacity of a director of the Company. 8. Miscellaneous. ------------- (a) Further Assurances. From time to time, at the other party's ------------------ request and without further consideration, each party hereto shall execute and deliver such additional documents and take all such further lawful action as may be necessary or desirable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement. (b) Entire Agreement. This Agreement and the Merger Agreement ---------------- constitute the entire agreement between the parties with respect to the subject matter hereof and supersedes all other prior agreements and understanding, both written and oral, between the parties with respect to the subject matter hereof. (c) Certain Events. Each Stockholder agrees that this Agreement and -------------- the obligations hereunder shall attach to the Shares of such Stockholder and shall be binding upon any Person to which legal or beneficial ownership of such Shares shall pass, whether by operation of law or otherwise, including, without limitation, such Stockholder's heirs, guardians, administrators or successors. Notwithstanding any transfer of Shares, the transferor shall remain liable for the performance of all obligations under this Agreement of the transferor. (d) Assignment. This Agreement shall not be assigned by operation of ---------- law or otherwise without the prior written consent of the other party, provided -------- that Parent may assign, at its sole discretion, its rights and obligations - ---- hereunder to any direct or indirect wholly-owned subsidiary of Parent, although no such assignment shall relieve Parent of its obligations hereunder if such assignee does not perform such obligations. (e) Amendments, Waivers, Etc. This Agreement may not be amended, ------------------------ changed, supplemented, waived or otherwise modified or terminated, except upon the execution and delivery of a written agreement executed by the relevant parties with respect to any one or more Stockholders hereto, provided that -------- ---- Schedule I hereto may be supplemented by Parent by adding the name and other relevant information concerning any stockholder of the Company who agrees to be bound by the terms of this Agreement without the agreement of any other party hereto, and thereafter such added stockholder shall be treated as a "Stockholder" for all purposes of this Agreement. (f) Notices. All notices, requests, claims, demands and other ------- communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly received -6- if so given) by hand delivery, telegram, telex or telecopy, or by mail (registered or certified mail, postage prepaid, return receipt requested) or by any courier service, such as Federal Express, providing proof of delivery. All communications hereunder shall be delivered to the respective parties at the following addresses: If to the Stockholders: At the addresses set forth on Schedule I hereto copies to: SMG-II Holdings Corporation 200 Milik Street Carteret, NJ 07008-1194 Telecopier: (732) 499-3460 Attention: Marc A. Strassler, Esq. and Shearman & Sterling 599 Lexington Avenue New York, NY 10022 Telecopier: (212) 848-7179 Attention: Spencer D. Klein, Esq. Rohan Weerasinghe, Esq. If to Parent or Sub: c/o Koninklijke Ahold N.V. Albert Heijnweg 1 1507 EH Zaandam The Netherlands Telecopier: 31-75-659-83-66 Attention: Paul J. Butzelaar, Esq. Ton van Tielraden, Esq. copy to: White & Case 1155 Avenue of the Americas New York, New York 10036 Telecopier: (212) 354-8113 Attention: John M. Reiss, Esq. -7- or to such other address as the Person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. (g) Severability. Whenever possible, each provision or portion of any ------------ provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. (h) Specific Performance. Each of the parties hereto recognizes and -------------------- acknowledges that a breach by it of any covenants or agreements contained in this Agreement 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 covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. (i) Remedies Cumulative. All rights, powers and remedies provided ------------------- under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such Party. (j) No Waiver. The failure of any party hereto to exercise any right, --------- power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof shall not constitute a waiver by such party of its right to exercise any such or other right, power or remedy or to demand such compliance. (k) No Third Party Beneficiaries. This Agreement is not intended to ---------------------------- be for the benefit of, and shall not be enforceable by, any person or entity who or which is not a party hereto. (l) Governing Law. This Agreement, and the legal relations between ------------- the parties hereto, shall be governed and construed in accordance with the laws of the State of New York, applicable to agreements executed and to be performed solely within such State. (m) Submission to Jurisdiction; Waiver of Jury Trial. The parties ------------------------------------------------ hereby submit to the jurisdiction of the United States District Court for the Southern District of New York and of any New York State Court sitting in the City of New York for purposes of all legal proceedings which may arise hereunder or under any of the other documents entered into in connection herewith. The parties irrevocably waive, to the fullest extent permitted by law, any objection which it may have or hereafter have to the laying of the venue of any such proceeding brought in -8- such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. The parties hereby consent to process being served in any such proceeding by the mailing of a copy thereof by registered or certified mail, postage prepaid, to their respective addresses specified in Section 8(f) or in any other manner permitted by law. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER DOCUMENTS ENTERED INTO IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OF ANY PARTY. (n) Descriptive Headings. The descriptive headings used herein are -------------------- inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. (o) Counterparts. This Agreement may be executed in two or more ------------ counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. 9. Termination. This Agreement shall terminate, and none of Parent, ----------- Sub or any Stockholder shall have any rights or obligations hereunder and this Agreement shall become null and void and have no effect upon the earlier of (i) termination of the Merger Agreement pursuant to Section 8.1 thereof (unless such Stockholder breaches any of its obligations hereunder in any material respect or if the Merger Agreement is terminated as the result of a material breach of any representation, warranty, obligation, covenant, agreement or condition of the Merger Agreement by the Company) and (ii) the election by such Stockholder at any time after February 15, 2000 to terminate this Agreement, except nothing in this Section 8 shall relieve any party of liability for breach of this Agreement. 10. Limited Liability of Partners. Notwithstanding any other ----------------------------- provision of this Agreement, neither the general partner nor the limited partners nor any future general or limited partner of any Stockholder shall have any personal liability for performance of any obligation of such Stockholder under this Agreement in excess of the respective capital contribution of such general partner and limited partners to such Stockholder. -9- IN WITNESS WHEREOF, Parent, Sub and each Stockholder have caused this Agreement to be duly executed as of the day and year first above written. KONINKLIJKE AHOLD N.V. By: /s/ R. G. Tobin ------------------------------------- Name: R. G. Tobin Title: Executive Vice President AHOLD ACQUISITION, INC. By: /s/ R. G. Tobin ------------------------------------- Name: R. G. Tobin Title: President -10- MLCP ASSOCIATES L.P. NO. II By MERRILL LYNCH CAPITAL PARTNERS, INC. as General Partner By /s/ Matthias Bowman ------------------------------ Name: Matthias Bowman Title: Vice President MERCHANT BANK L.P. NO. IV By MERRILL LYNCH MBP, INC., as General Partner By /s/ Mark McAndrews ------------------------------ Name: Mark McAndrews Title: President MERRILL LYNCH KECALP, L.P. 1989 By KECALP INC., as General Partner By /s/ Matthias Bowman ------------------------------ Name: Matthias Bowman Title: Vice President MERRILL LYNCH KECALP, L.P. 1991 By KECALP INC., as General Partner By /s/ Matthias Bowman ------------------------------ Name: Matthias Bowman Title: Vice President THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES By /s/ U. Peter C. Gummeson ------------------------------ Name: U. Peter C. Gummeson Title: Investment Officer -11- MERCHANT BANKING L.P. NO. 1 By MERRILL LYNCH MBP INC., as General Partner By /s/ Mark McAndrews ------------------------------ Name: Mark McAndrews Title: President MERRILL LYNCH KECALP L.P. 1987 By KECALP INC., as General Partner By /s/ Matthias Bowman ------------------------------ Name: Matthias Bowman Title: Vice President MERRILL LYNCH CAPITAL APPRECIATION PARTNERSHIP NO. B-X, L.P. By MERRILL LYNCH LBO PARTNERS NO. B-II, L.P., as General Partner By MERRILL LYNCH CAPITAL PARTNERS, INC., as General Partner By /s/ Matthias Bowman ------------------------------ Name: Matthias Bowman Title: Vice President ML OFFSHORE LBO PARTNERSHIP NO. B-X By MERRILL LYNCH LBO PARTNERS NO. B-II, L.P., as Investment General Partner By MERRILL LYNCH CAPITAL PARTNERS, INC., as General Partner By /s/ Matthias Bowman ------------------------------ Name: Matthias Bowman Title: Vice President -12- MERRILL LYNCH CAPITAL APPRECIATION PARTNERSHIP NO. IX, L.P. By MERRILL LYNCH LBO PARTNERS NO. II, L.P., as General Partner By MERRILL LYNCH CAPITAL PARTNERS, INC., as General Partner By /s/ Matthias Bowman ------------------------------ Name: Matthias Bowman Title: Vice President ML OFFSHORE LBO PARTNERSHIP NO. IX By MERRILL LYNCH LBO PARTNERS NO. II, L.P., as Investment General Partner By MERRILL LYNCH CAPITAL PARTNERS, INC., as General Partner By /s/ Matthias Bowman ------------------------------ Name: Matthias Bowman Title: Vice President ML EMPLOYEES LBO PARTNERSHIP NO. I, L.P. By ML EMPLOYEES LBO MANAGERS, INC., as General Partner By /s/ Matthias Bowman ------------------------------ Name: Matthias Bowman Title: Vice President ML IBK POSITIONS, INC. By /s/ Matthias Bowman ------------------------------ Name: Matthias Bowman Title: Vice President -13- EQUITABLE DEAL FLOW FUND, L.P. By EQUITABLE MANAGED ASSETS, L.P., as General Partner By THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, as General Partner By /s/ U. Peter C. Gummeson ------------------------------ Name: U. Peter C. Gummeson Title: Investment Officer JAMES L. DONALD, INDIVIDUAL STOCKHOLDER By /s/ James L. Donald ------------------------------ James L. Donald -14- EXHIBIT I To Stockholders Agreement
Number of Shares of Class of Company Stock held by Name of Stockholder Class of Company Stock Stockholder - ----------------------------------------- ------------------------------ ----------------------------- Merrill Lynch Capital Class A Common Stock 488,704.8 Appreciation Partnership No. IX, L.P. ML Offshore LBO Partnership No. IX Class A Common Stock 12,424.7 ML Employees LBO Partnership No. I, L.P. Class A Common Stock 12,148.6 ML IBK Positions, Inc. Class A Common Stock 21,258.9 Merchant Banking L.P. No. 1 Class A Common Stock 8,119 Merrill Lynch KECALP L.P. 1987 Class A Common Stock 7,344 The Equitable Life Assurance Society of Class B Common Stock 150,000 the United States Equitable Deal Flow Fund, L.P. Class B Common Stock 150,000 Merrill Lynch Capital Series A Preferred Stock 133,043 Appreciation Partnership No. B-X, L.P. ML Offshore LBO Partnership No. B-X Series A Preferred Stock 40,950
EXHIBIT I Page 2
Number of Shares of Class of Company Stock held by Name of Stockholder Class of Company Stock Stockholder - ----------------------------------------- ------------------------------ ----------------------------- MLCP Associates L.P. No. II Series A Preferred Stock 1,740 ML IBK Positions, Inc. Series A Preferred Stock 46,344.5 Merchant Bank L.P. No. IV Series A Preferred Stock 3,779 Merrill Lynch KECALP, L.P. 1989 Series A Preferred Stock 7,000 Merrill Lynch KECALP, L.P. 1991 Series A Preferred Stock 3,874.5 The Equitable Life Assurance Society of Series B Preferred Stock 84,134 the United States Equitable Deal Flow Fund, L.P. Series B Preferred Stock 84,135 James Donald Series C Preferred Stock 8,520
EX-99.(C)(3) 13 AGREEMENT AND PLAN OF MERGER DATED 03/09/99 EXHIBIT (c)(3) ================================================================================ AGREEMENT AND PLAN OF MERGER BY AND AMONG KONINKLIJKE AHOLD N.V. AHOLD ACQUISITION, INC. and SMG-II HOLDINGS CORPORATION Dated as of March 9, 1999 ================================================================================ TABLE OF CONTENTS -----------------
Page ---- ARTICLE I DEFINITIONS........................................................................... 2 Section 1. Definitions................................................... 2 ARTICLE II THE MERGER............................................................................ 6 Section 2.1 The Merger................................................... 6 Section 2.2 Conversion of Stock.......................................... 7 Section 2.3 Dissenting Stock............................................. 7 Section 2.4 Surrender of Certificates.................................... 8 Section 2.5 Payment...................................................... 9 Section 2.6 No Further Rights of Transfers............................... 9 Section 2.7 Stock Option and Other Plans................................. 10 Section 2.8 Certificate of Incorporation of the Surviving Corporation.... 10 Section 2.9 By-Laws of the Surviving Corporation......................... 10 Section 2.10 Directors and Officers of the Surviving Corporation......... 10 Section 2.11 Closing..................................................... 11 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................... 11 Section 3. Representations and Warranties of the Company................. 11 Section 3.1 Due Organization, Good Standing and Corporate Power.......... 11 Section 3.2 Authorization and Validity of Agreement...................... 11 Section 3.3 Capitalization............................................... 12 Section 3.4 Consents and Approvals; No Violations........................ 12 Section 3.5 Financial Statements......................................... 13 Section 3.6 Public Reports............................................... 14 Section 3.7 Absence of Certain Changes................................... 14 Section 3.8 Compliance with Laws......................................... 15 Section 3.9 Employee Benefit Plan Triggering Events...................... 15 Section 3.10 Liabilities................................................. 15 Section 3.11 Broker's or Finder's Fee.................................... 15 Section 3.12 State Takeover Statutes..................................... 16 Section 3.13 Voting Requirements......................................... 16
(i)
Page ---- ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB...................................... 16 Section 4.1 Due Organization; Good Standing and Corporate Power.......... 16 Section 4.2 Authorization and Validity of Agreement...................... 16 Section 4.3 Consents and Approvals; No Violations........................ 17 Section 4.4 Broker's or Finder's Fee..................................... 17 Section 4.5 Financing.................................................... 17 ARTICLE V COVENANTS............................................................................. 17 Section 5.1 Access to Information Concerning Properties and Records...... 17 Section 5.2 Confidentiality.............................................. 18 Section 5.3 Conduct of the Business of the Company and its Subsidiaries.. 18 Section 5.4 Stockholder Approval......................................... 21 Section 5.5 Best Efforts................................................. 21 Section 5.6 No Solicitation of Other Offers.............................. 22 Section 5.7 Notification of Certain Matters.............................. 22 Section 5.8 Antitrust Filings............................................ 23 Section 5.9 Transfer Taxes............................................... 24 Section 5.10 SMGH Preferred Stock Tender Offer........................... 24 Section 5.11 Merger of SMG-II and SMGH................................... 26 Section 5.12 Employee Benefits........................................... 26 Section 5.13 Directors' and Officers' Insurance; Indemnification......... 26 ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND SUB................................. 28 Section 6. Conditions Precedent to Obligations of Parent and Sub......... 28 Section 6.1 Truth of Representations and Warranties...................... 28 Section 6.2 Performance of Agreements.................................... 28 Section 6.3 Approval of Company's Stockholders........................... 28 Section 6.4 HSR Act...................................................... 28 Section 6.5 Injunction................................................... 29 Section 6.6 SMGH Preferred Stock Tender Offer............................ 29 Section 6.7 Statutes..................................................... 29 Section 6.8 Company Stockholders' Agreement.............................. 29 Section 6.9 No Material Adverse Effect................................... 29 Section 6.10 Fulfillment of Company Conditions........................... 29
(ii)
Page ---- ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY............................................................ 29 Section 7. Conditions Precedent to Obligations of the Company............ 29 Section 7.1 Truth of Representations and Warranties...................... 29 Section 7.2 Performance of Agreements.................................... 29 Section 7.3 HSR Act Waiting Periods...................................... 30 Section 7.4 Injunction................................................... 30 Section 7.5 Approval of Company's Stockholders........................... 30 Section 7.6 Statutes..................................................... 30 ARTICLE VIII TERMINATION AND ABANDONMENT........................................................... 30 Section 8.1 Termination.................................................. 30 Section 8.2 Effect of Termination........................................ 31 ARTICLE IX MISCELLANEOUS......................................................................... 31 Section 9.1 Fees and Expenses............................................ 31 Section 9.2 Representations and Warranties............................... 31 Section 9.3 Extension; Waiver............................................ 32 Section 9.4 Public Announcements......................................... 32 Section 9.5 Governing Law................................................ 32 Section 9.6 Captions..................................................... 32 Section 9.7 Notices...................................................... 32 Section 9.8 Binding Effect; Benefit; Assignment.......................... 33 Section 9.9 Counterparts................................................. 33 Section 9.10 Entire Agreement............................................. 34 Section 9.11 Amendments................................................... 34 Section 9.12 Severability................................................. 34 Section 9.13 Disclosure Letter............................................ 34 Section 9.14 Submission to Jurisdiction; Waiver of Jury Trial............. 34
(iii) AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of March 9, 1999 (this "Agreement"), --------- by and among KONINKLIJKE AHOLD N.V., a company organized under the laws of the Netherlands ("Parent"), AHOLD ACQUISITION, INC., a company organized under the ------ laws of Delaware and an indirect wholly-owned subsidiary of Parent ("Sub") and --- SMG-II HOLDINGS CORPORATION, a company organized under the laws of Delaware (the "Company"). ------- W I T N E S S E T H : -------------------- WHEREAS, the respective Boards of Directors of Parent, Sub and the Company have approved the acquisition of the Company by Sub; WHEREAS, to complete such acquisition, the respective Boards of Directors of Parent, Sub and the Company have approved the merger of Sub into the Company (the "Merger"), pursuant to and subject to the terms and conditions of this ------ Agreement; WHEREAS, the Directors of the Company have unanimously determined that the Merger is fair to, and in the best interests of, the holders of shares of Class A Common Stock, par value $0.01 per share (the "Class A Common Stock"), of the -------------------- Company, the holders of shares of Class B Common Stock, par value $0.01 per share (the "Class B Common Stock"), of the Company, the holders of shares of -------------------- Series A Cumulative Convertible Preferred Stock, par value $0.01 per share (the "Series A Preferred Stock"), of the Company, the holders of shares of Series B ------------------------ Cumulative Convertible Preferred Stock, par value $0.01 per share (the "Series B -------- Preferred Stock"), of the Company, and the holders of shares of Series C - --------------- Cumulative Convertible Preferred Stock, par value $0.01 per share (the "Series C -------- Preferred Stock" and, together with the Class A Common Stock, the Class B Common - --------------- Stock, the Series A Preferred Stock and the Series B Preferred Stock, collectively, the "Stock"), of the Company; ----- WHEREAS, Parent and Sub are unwilling to enter into this Agreement unless certain stockholders of the Company concurrently with the execution and delivery of this Agreement, enter into a stockholders agreement (the "Stockholders ------------ Agreement") by and among Parent, Sub and such holders of Stock of the Company - --------- providing for, among other things, the agreement of such holders of Stock to vote all shares of Stock owned by such holders of Stock in favor of the Merger and the grant to Sub of an option to purchase all such shares of Stock at the Applicable Merger Consideration (as such term is defined herein) under the circumstances set forth in such agreement; WHEREAS, Sub will make a tender offer (the "Tender Offer") to purchase all ------------ of the issued and outstanding $3.52 Cumulative Exchangeable Preferred Stock, par value $0.01 per share (the "SMGH Preferred Stock"), of Supermarkets General -------------------- Holdings Corporation, a company organized under the laws of Delaware and a wholly-owned subsidiary of the Company ("SMGH"), subject to the terms and conditions of this Agreement and certain ---- other conditions, at a price of $38.25 per share, net to the Seller in cash (the "Tender Offer Price per Share"); ---------------------------- WHEREAS, the parties hereto have agreed that, in the event certain conditions set forth herein are not satisfied, the Company shall in the alternative cause PTK Holdings, Inc., a company organized under the laws of the State of Delaware and an indirect wholly-owned subsidiary of the Company ("PTK"), to sell, and Sub shall in the alternative purchase, an aggregate of 100 --- shares of Common Stock, par value $.10 per share (the "Pathmark Stock"), of -------------- Pathmark Stores, Inc., a company organized under the laws of Delaware ("Pathmark"), being all of the issued and outstanding shares of capital stock of - ---------- Pathmark, all in accordance with a separate stock purchase agreement entered into by and among the Company, PTK, Sub and Parent concurrently with the execution of this Agreement (the "Alternative Stock Purchase Agreement)". NOW, THEREFORE, IT IS AGREED: ARTICLE I DEFINITIONS ----------- Section 1. Definitions. When used in this Agreement, the following terms ----------- shall have the respective meanings specified therefor below (such meanings to be equally applicable to both the singular and plural forms of the terms defined). "Acquisition Proposal" shall have the meaning assigned to such term in -------------------- Section 5.6(a). "Affiliate" of any Person shall mean any Person directly or indirectly --------- controlling, controlled by, or under common control with, such Person; provided -------- that, for the purposes of this definition, "control" (including, with - ---- correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or partnership interests, by contract or otherwise. "Agreement" shall have the meaning assigned to such term in the preamble to --------- this Agreement. "Alcohol and Drug Laws" shall have the meaning assigned to such term in --------------------- Section 3.4. "Alternative Stock Purchase Agreement" shall have the meaning assigned to ------------------------------------ such term in the sixth recital to this Agreement. "Alternative Structure" shall have the meaning assigned to such term in --------------------- Section 2.1(d). "Antitrust Law" shall have the meaning assigned to such term in Section ------------- 5.8(d). -2- "Applicable Merger Consideration" shall have the meaning assigned to such ------------------------------- term in Section 2.2(a). "Balance Sheet" shall have the meaning assigned to such term in Section ------------- 3.5(a). "Balance Sheet Date" shall have the meaning assigned to such term in ------------------ Section 3.5(a). A "business day" shall mean any day, other than a Saturday, Sunday or a day ------------ on which banks located in New York City and Amsterdam shall be authorized or required by law to close. "Certificate of Merger" shall have the meaning assigned to such term in --------------------- Section 2.1(a). "Certificates" shall have the meaning assigned to such term in Section ------------ 2.4(a). "Class A Common Stock" shall have the meaning assigned to such term in the -------------------- third recital to this Agreement. "Class B Common Stock" shall have the meaning assigned to such term in the -------------------- third recital to this Agreement. "Closing" shall have the meaning assigned to such term in Section 2.11. ------- "Closing Date" shall have the meaning assigned to such term in Section ------------ 2.11. "Code" shall mean the Internal Revenue Code of 1986, as amended from time ---- to time and the Treasury regulations promulgated and the rulings issued thereunder. "Commission" shall have the meaning assigned to such term in Section ---------- 3.6(a). "Company" shall have the meaning assigned to such term in the preamble to ------- this Agreement. "Company Stockholders' Agreement" shall mean the Stockholders Agreement, ------------------------------- dated February 4, 1991, by and among the Company and its stockholders, as amended. "Condition" shall mean, with respect to any Person the business, --------- properties, assets, liabilities, results of operations or condition (financial or otherwise) of such Person. "Credit Agreement" shall have the meaning assigned to such term in Section ---------------- 3.10. "Disclosure Letter" shall mean that certain Disclosure Letter, dated the ----------------- date hereof, delivered by the Company to the Purchaser concurrently with the execution of this Agreement. "Dissenting Stockholders" shall have the meaning assigned to such term in ----------------------- Section 2.3. "Effective Time" shall have the meaning assigned to such term in Section -------------- 2.1(a). "Employee Benefit Plan" shall have the meaning assigned to such term in --------------------- Section 3.9. -3- "ERISA" shall have the meaning assigned to such term in Section 3.9. ----- "Exchange Act" shall have the meaning assigned to such term in Section ------------ 5.10(a). "GAAP" shall mean generally accepted accounting principles of the United ---- States of America. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of ------- 1976, as amended, and the rules and regulations thereunder. "Indemnified Parties" shall have the meaning assigned to such term in ------------------- Section 5.13(b). "Liens" shall mean, collectively, liens, security interests, options, ----- rights of first refusal, easements, mortgages, charges, indentures, deeds of trust, rights of way, restrictions on the use of real property, encroachments, licenses to third parties, leases to third parties, security agreements, or any other encumbrances and other restrictions or limitations on use of real or personal property. "Management Options" shall have the meaning assigned to such term in ------------------ Section 2.7. "Merger" shall have the meaning assigned to such term in the second recital ------ to this Agreement. "Minimum Condition" shall have the meaning assigned to such term in Section ----------------- 5.10(a). "October Balance Sheet" shall have the meaning assigned to such term in --------------------- Section 3.5(a). "Offer Documents" shall have the meaning assigned to such term in Section --------------- 5.10(b). "Parent" shall have the meaning assigned to such term in the preamble to ------ this Agreement. "Paying Agent" shall have the meaning assigned to such term in Section ------------ 2.4(a). "Payment Fund" shall have the meaning assigned to such term in Section 2.5. ------------ "Pathmark" shall have the meaning assigned to such term in the sixth -------- recital to this Agreement. "Pathmark Stock" shall have the meaning assigned to such term in the sixth -------------- recital to this Agreement. "Permitted Investments" shall have the meaning assigned to such term in --------------------- Section 2.5. "Person" shall mean and include an individual, a partnership, a joint ------ venture, a corporation, a limited liability company, a limited liability partnership, a trust, an incorporated organization and a government or other department or agency thereof. "PTK" shall have the meaning assigned to such term in the sixth recital to --- this Agreement. -4- "Public Disclosure Date" shall have the meaning assigned to such term in ---------------------- Section 3.6(a). "Public Reports" shall have the meaning assigned to such term in Section -------------- 3.6(a). "Schedule 14D-1" shall have the meaning assigned to such term in Section -------------- 5.10(b). "Schedule 14D-9" shall have the meaning assigned to such term in Section -------------- 5.10(c). "Second Step Merger" shall have the meaning assigned to such term in ------------------ Section 5.11. "Series A Preferred Stock" shall have the meaning assigned to such term in ------------------------ the third recital to this Agreement. "Series B Preferred Stock" shall have the meaning assigned to such term in ------------------------ the third recital to this Agreement. "Series C Preferred Stock" shall have the meaning assigned to such term in ------------------------ the third recital to this Agreement. "SMGH" shall have the meaning assigned to such term in the fifth recital to ---- this Agreement. "SMGH Preferred Stock" shall have the meaning assigned to such term in the -------------------- fifth recital to this Agreement. "Stock" shall have the meaning assigned to such term in the third recital ----- to this Agreement. "Stock Incentive Plans" shall have the meaning assigned to such term in --------------------- Section 2.7. "Stock Plans" shall have the meaning assigned to such term in Section 2.7. ----------- "Stockholders Agreement" shall have the meaning assigned to such term in ---------------------- the fourth recital to this Agreement. "Sub" shall have the meaning assigned to such term in the preamble to this --- Agreement. "Supply Agreement" shall mean the First Amended and Restated Supply ---------------- Agreement dated January 29, 1998, by and between Pathmark and C&S Wholesale Grocers, Inc. "Surviving Corporation" shall have the meaning assigned to such term in --------------------- Section 2.1(b). "Tender Offer" shall have the meaning assigned to such term in the fifth ------------ recital to this Agreement. "Tender Offer Conditions" shall have the meaning assigned to such term in ----------------------- Section 5.10(a). -5- "Tender Offer Price per Share" shall have the meaning assigned to such term ---------------------------- in the fifth recital to this Agreement. "Third Party Provisions" shall have the meaning assigned to such term in ---------------------- Section 9.8. "Transfer Taxes" shall have the meaning assigned to such term in Section -------------- 5.9. "Working Capital Facility" shall have the meaning assigned to such term in ------------------------ Section 3.10. ARTICLE II THE MERGER ---------- Section 2.1 The Merger. (a) Upon the terms and subject to the terms and ---------- conditions of this Agreement, at the Closing (as such term is defined in Section 2.11), a certificate of merger (the "Certificate of Merger") shall be duly --------------------- prepared, executed and acknowledged by Sub and the Company in accordance with the Delaware General Corporation Law and shall be filed with the Secretary of State of Delaware as provided in Section 251 of the Delaware General Corporation Law. The Merger shall become effective upon the filing of the Certificate of Merger (or at such later time reflected in such Certificate of Merger as shall be agreed by Parent and the Company). The date and time when the Merger shall become effective is hereinafter referred to as the "Effective Time." -------------- (b) At the Effective Time, Sub shall be merged with and into the Company and the separate corporate existence of Sub shall cease, and the Company shall continue as the surviving corporation under the laws of the State of Delaware under the name of "Pathmark Holdings Corporation" (the "Surviving Corporation"). --------------------- (c) From and after the Effective Time, the Merger shall have the effects set forth in Section 259(a) of the Delaware General Corporation Law. (d) If Parent so elects, the Merger may alternatively be structured with Sub as the Surviving Corporation or so that any direct or indirect subsidiary of Parent is merged with and into the Company or the Company is merged with and into any such other subsidiary (an "Alternative Structure"). In the event of --------------------- such an election, the parties agree to execute an appropriate amendment to this Agreement in order to reflect such election. If Parent elects to use an Alternative Structure, the inaccuracy of any representation or warranty of the Company which is premised on the assumption that Sub shall be merged with and into the Company and the Company shall be the Surviving Corporation, which representation or warranty becomes inaccurate solely as a result of the use of such Alternative Structure shall not be deemed to be a breach of such representation or warranty. (e) If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to continue in, vest, perfect or confirm of record or otherwise in the Surviving Corporation's right, title or interest in, to or under any of the rights, properties, -6- privileges, franchises or assets of either of its constituent corporations acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger, or otherwise to carry out the intent of this Agreement, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of either of the constituent corporations of the Merger, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of each of such corporations or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties, privileges, franchises or assets in the Surviving Corporation or otherwise to carry out the intent of this Agreement. Section 2.2 Conversion of Stock. At the Effective Time: ------------------- (a) Each share of Stock issued and outstanding immediately prior to the Effective Time (other than (i) any shares of Stock which are held by any subsidiary of the Company or in the treasury of the Company, or which are held, directly or indirectly, by Parent or any direct or indirect subsidiary of Parent (including Sub), all of which shall cease to be outstanding and be canceled and retired and none of which shall receive any payment with respect thereto and (ii) shares of Stock held by Dissenting Stockholders (as such term is defined in Section 2.3)) and all rights in respect thereof shall, by virtue of the Merger and without any action on the part of the holder thereof, forthwith cease to exist and be converted into and represent the right to receive an amount in cash, without interest as follows (such amount, with respect to each share of Stock, the "Applicable Merger Consideration"): ------------------------------- (i) each share of Class A Common Stock - $5.315; (ii) each share of Class B Common Stock - $5.315; (iii) each share of Series A Preferred Stock - $113.353; (iv) each share of Series B Preferred Stock - $113.353; and (v) each share of Series C Preferred Stock - $113.353. (b) Each share of common stock, par value $0.01 per share, of Sub then issued and outstanding shall, by virtue of the Merger and without any action on the part of the holder thereof, become one fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation. Section 2.3 Dissenting Stock. Notwithstanding anything contained in this ---------------- Agreement to the contrary but only to the extent required by the Delaware General Corporation Law, shares of Stock that are issued and outstanding immediately prior to the Effective Time and are held by holders of Stock who comply with all the provisions of the law of the State of Delaware concerning the right of holders of Stock to dissent from the Merger and require appraisal of their shares of Stock (such holders, "Dissenting Stockholders") shall not be ----------------------- converted into the right to receive the Applicable Merger Consideration but shall become the right to receive such consideration as may be determined to be due such Dissenting Stockholder pursuant to the law of the State of Delaware; provided, however, that (i) if any Dissenting Stockholder shall subsequently - -------- ------- deliver a -7- written withdrawal of his or her demand for appraisal (with the written approval of the Surviving Corporation, if such withdrawal is not tendered within 60 days after the Effective Time), or (ii) if any Dissenting Stockholder fails to establish and perfect his or her entitlement to appraisal rights as provided by applicable law, or (iii) if within 120 days of the Effective Time neither any Dissenting Stockholder nor the Surviving Corporation has filed a petition demanding a determination of the value of all shares of Stock outstanding at the Effective Time and held by Dissenting Stockholders in accordance with applicable law, then such Dissenting Stockholder or Dissenting Stockholders, as the case may be, shall forfeit the right to appraisal of such shares and such shares shall thereupon be deemed to have been converted into the right to receive, as of the Effective Time, the Applicable Merger Consideration, without interest. The Company shall give Parent and Sub (x) prompt notice of any written demands for appraisal, withdrawals of demands for appraisal and any other related instruments received by the Company, and (y) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal. The Company shall not voluntarily make any payment with respect to any demands for appraisal and shall not, except with the prior written consent of Parent, settle or offer to settle any demand. Section 2.4 Surrender of Certificates. (a) Prior to the Effective Time, ------------------------- Parent shall designate a bank or trust company located in the United States to act as paying agent (the "Paying Agent") for purposes of making the cash ------------ payments contemplated hereby. As soon as practicable after the Effective Time, Parent shall cause the Paying Agent to mail and/or make available to each holder of a certificate theretofore evidencing shares of Common Stock (other than those which are held by any subsidiary of the Company or in the treasury of the Company or which are held directly or indirectly by Parent or any direct or indirect subsidiary of Parent (including Sub)) a notice and letter of transmittal advising such holder of the effectiveness of the Merger and the procedure for surrendering to the Paying Agent such certificate or certificates which immediately prior to the Effective Time represented outstanding Common Stock (the "Certificates") in exchange for the Applicable Merger Consideration ------------ deliverable in respect thereof pursuant to this Article II. Upon the surrender for cancellation to the Paying Agent of such Certificates, together with a letter of transmittal, duly executed and completed in accordance with the instructions thereon, and any other items specified by the letter of transmittal, the Paying Agent shall promptly pay to the Person entitled thereto the Applicable Merger Consideration deliverable in respect thereof. Until so surrendered, each Certificate shall be deemed, for all corporate purposes, to evidence only the right to receive upon such surrender the Applicable Merger Consideration deliverable in respect thereof to which such Person is entitled pursuant to this Article II. No interest shall be paid or accrued in respect of such cash payments. (b) If the Applicable Merger Consideration (or any portion thereof) is to be delivered to a Person other than the Person in whose name the Certificates surrendered in exchange therefor are registered, it shall be a condition to the payment of the Applicable Merger Consideration that the Certificates so surrendered shall be properly endorsed or accompanied by appropriate stock powers and otherwise in proper form for transfer, that such transfer otherwise be proper and that the Person requesting such transfer pay to the Paying Agent any transfer or other taxes payable by reason of the foregoing or establish to the satisfaction of the Paying Agent that such taxes have been paid or are not required to be paid. -8- (c) In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed, the Paying Agent will issue in exchange for such lost, stolen or destroyed Certificate the Applicable Merger Consideration deliverable in respect thereof as determined in accordance with this Article II, provided that the Person to whom the Applicable Merger -------- ---- Consideration is paid shall, as a condition precedent to the payment thereof, give the Surviving Corporation a bond in such sum as it may direct or otherwise indemnify the Surviving Corporation in a manner satisfactory to it against any claim that may be made against the Surviving Corporation with respect to the Certificate claimed to have been lost, stolen or destroyed. Section 2.5 Payment. Concurrently with or immediately prior to the ------- Effective Time, Parent or Sub shall deposit in trust with the Paying Agent cash in United States dollars in an aggregate amount equal to the product of (i) the number of shares of each class of Stock outstanding immediately prior to the Effective Time (other than shares of Stock which are held by any subsidiary of the Company or in the treasury of the Company or which are held directly or indirectly by Parent or any direct or indirect subsidiary of Parent (including Sub) or a Person known at the time of such deposit to be a Dissenting Stockholder) and (ii) the Applicable Merger Consideration (such amount being hereinafter referred to as the "Payment Fund"). The Payment Fund shall be ------------ invested by the Paying Agent as directed by Parent in direct obligations of the United States, obligations for which the full faith and credit of the United States is pledged to provide for the payment of principal and interest, commercial paper of an issuer organized under the laws of a state of the United States rated of the highest quality by Moody's Investors Services, Inc. or Standard & Poor's Ratings Group or certificates of deposit, bank repurchase agreements or bankers' acceptances of a United States commercial bank having at least $1,000,000,000 in assets (collectively, "Permitted Investments") or in --------------------- money market funds which are invested in Permitted Investments, and any net earnings with respect thereto shall be paid to Parent as and when requested by Parent. The Paying Agent shall, pursuant to irrevocable instructions, make the payments referred to in Section 2.2(a) hereof out of the Payment Fund. The Payment Fund shall not be used for any other purpose. Promptly following the date which is three months after the Effective Time, the Paying Agent shall return to the Surviving Corporation all cash, certificates and other instruments in its possession that constitute any portion of the Payment Fund (other than net earnings on the Payment Fund which shall be paid to Parent), and the Paying Agent's duties shall terminate. Thereafter, each holder of a Certificate may surrender such Certificate to the Surviving Corporation and (subject to applicable abandoned property, escheat and similar laws) receive in exchange therefor the Applicable Merger Consideration, without interest, but shall have no greater rights against the Surviving Corporation than may be accorded to general creditors of the Surviving Corporation or Parent under applicable law. Notwithstanding the foregoing, neither the Paying Agent nor any party hereto shall be liable to a holder of shares of Stock for any Applicable Merger Consideration delivered to a public official pursuant to applicable abandoned property, escheat and similar laws. Section 2.6 No Further Rights of Transfers. At and after the Effective ------------------------------ Time, each holder of Stock shall cease to have any rights as a stockholder of the Company, except for, in the case of a holder of a Certificate (other than shares of Stock to be canceled pursuant to Section 2.2(a) hereof or held by Dissenting Stockholders), the right to surrender his or her Certificate in exchange for payment of the Applicable Merger Consideration or, in the case of a Dissenting -9- Stockholder, to perfect his or her right to receive payment for his or her shares pursuant to the laws of the State of Delaware if such holder has validly perfected and not withdrawn or otherwise lost his or her right to receive payment for his or her shares, and no transfer of shares of Stock shall be made on the stock transfer books of the Surviving Corporation. Certificates presented to the Surviving Corporation after the Effective Time shall be canceled and exchanged for cash as provided in this Article II. At the close of business on the day of the Effective Time the stock ledger of the Company with respect to Stock shall be closed. Section 2.7 Stock Option and Other Plans. Prior to the Effective Time, ---------------------------- the Board of Directors of the Company (or, if appropriate, any committee thereof), shall take all actions and shall obtain all necessary consents and releases from all of the holders of all of the outstanding stock options and other rights to purchase Stock (the "Management Options") heretofore granted ------------------ under any stock option plan of the Company or otherwise (collectively, the "Stock Plans") to (i) provide for the cancellation, effective as of the - ------------ Effective Time of all Management Options, (ii) terminate, as of the Effective Time, the Stock Plans and any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company or any of its subsidiaries (collectively with the Stock Plans, the "Stock Incentive Plans") with respect to any interest in the capital stock of - ---------------------- the Company or any of its subsidiaries and (iii) amend, as of the Closing Date, the provisions in any other Employee Benefit Plan (as such term is defined in Section 3.9) providing for the issuance, transfer or grant of any capital stock of the Company or any of its subsidiaries, or any interest in respect of any capital stock of the Company or any of its subsidiaries to provide no continuing rights to acquire, hold, transfer or grant any capital stock of the Company or any of its subsidiaries or any interest in the capital stock of the Company or any of its subsidiaries. Incident to the foregoing, any then outstanding stock appreciation rights or limited stock appreciation rights shall be canceled immediately prior to the Effective Time without any payment therefor. Section 2.8 Certificate of Incorporation of the Surviving Corporation. --------------------------------------------------------- The Certificate of Incorporation of the Company, as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation and shall be amended following the Merger so that Article IV thereof reads in its entirety as follows: "The total number of shares of Stock of all classes which the Corporation has authority to issue is 1,000 shares of Common Stock, par value one cent ($0.01) per share." Section 2.9 By-Laws of the Surviving Corporation. The By-Laws of the ------------------------------------ Company, as in effect immediately prior to the Effective Time, shall be the By- Laws of the Surviving Corporation. Section 2.10 Directors and Officers of the Surviving Corporation. At the --------------------------------------------------- Effective Time, the directors of Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation, each of such directors to hold office, subject to the applicable provisions of the Certificate of Incorporation and By-Laws of the Surviving Corporation, until the next annual stockholders' meeting of the Surviving Corporation and until their respective successors shall be duly elected or appointed and qualified. At the Effective Time, the officers of Sub immediately prior to the Effective Time shall, subject to the applicable provisions of the Certificate of Incorporation and By-Laws of the Surviving Corporation, be the officers of the Surviving Corporation until their respective successors shall be duly elected or appointed and qualified. -10- Section 2.11 Closing. The Merger (the "Closing") shall take place at ------- ------- 10:00 A.M. at the offices of White & Case LLP, 1155 Avenue of the Americas, New York, New York 10036 as soon as practicable, but in any event within three (3) business days after the last of the conditions set forth in Articles VI and VII hereof is satisfied or waived or at such other time and date as the parties hereto shall agree in writing. Such date is herein referred to as the "Closing ------- Date". - ---- ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY ---------------------------------------------- Section 3. Representations and Warranties of the Company. The Company --------------------------------------------- hereby represents and warrants to Parent and Sub as follows: Section 3.1 Due Organization, Good Standing and Corporate Power. Each of --------------------------------------------------- the Company and its subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and each of the Company and its subsidiaries has the corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each of the Company and its subsidiaries is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except in such jurisdictions where the failure to be so qualified or licensed and in good standing would not have a material adverse effect on the Condition of the Company and its subsidiaries taken as a whole. The Company has made available to Parent complete and correct copies of the certificates of incorporation and by-laws or other organizational documents of each of the Company and its subsidiaries, in each case as amended to the date of this Agreement. Except as set forth on Schedule 3.1 of the Disclosure Letter, the respective certificates of incorporation and by-laws or other organizational documents of each of the Company and its subsidiaries do not contain any provision limiting or otherwise restricting the ability of such Person to control its subsidiaries. Section 3.2 Authorization and Validity of Agreement. The Company has the --------------------------------------- necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate (subject to the approval of the stockholders of the Company) the transactions contemplated hereby. The execution, delivery and performance of this Agreement by the Company, and the consummation by it of the transactions contemplated hereby, have been duly authorized and approved by its Board of Directors and no other corporate or stockholder action on the part of the Company is necessary to authorize the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby (other than the approval of this Agreement by the stockholders of the Company). This Agreement has been duly executed and delivered by the Company and is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether considered in a proceeding at law or in equity). -11- Section 3.3 Capitalization. Schedule 3.3(a) of the Disclosure Letter sets -------------- forth (i) the authorized, issued and outstanding capital stock of each of the Company and its subsidiaries and (ii) the owners of the issued and outstanding shares of capital stock of each of the Company and its subsidiaries (or, in the case of (x) the Stock, each owner of record of the issued and outstanding shares of Stock and (y) SMGH, each owner of common stock only). All issued and outstanding capital stock of each of the Company and its subsidiaries has been duly authorized and validly issued and is fully paid and nonassessable, and is not subject to, nor was issued in violation of, any preemptive rights. Except as set forth on Schedule 3.3(b) of the Disclosure Letter, no shares of capital stock of either the Company or any of its subsidiaries are authorized, issued or outstanding and there are no outstanding or authorized options, warrants, rights, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities, or other commitments, contingent or otherwise, relating to capital stock of the Company or any of its subsidiaries, pursuant to which the Company or any of its subsidiaries is or may become obligated to issue shares of its capital stock or any securities convertible into, exchangeable for, or evidencing the right to subscribe for, any shares of the capital stock of the Company or any of its subsidiaries. Neither the Company nor any of its subsidiaries has authorized or outstanding bonds, debentures, notes or other indebtedness the holders of which have the right to vote (or convertible or exchangeable into or exercisable for securities having the right to vote) with the stockholders of such Person on any matter. Except as set forth on Schedule 3.3(c) of the Disclosure Letter, neither the Company nor any of its subsidiaries owns, directly or indirectly, any capital stock or other equity, ownership or proprietary interest in any Person. Except as set forth on Schedule 3.3(d) of the Disclosure Letter, all of the outstanding shares of capital stock of each of the subsidiaries of the Company (other than the SMGH Preferred Stock) are owned, of record and beneficially, by the Company or its subsidiaries free and clear of any Liens. Except as set forth on Schedule 3.3(e) of the Disclosure Letter, there are no restrictions of any kind which prevent or restrict the payment of dividends by the Company or any of its subsidiaries. Section 3.4 Consents and Approvals; No Violations. Other than in ------------------------------------- connection with or in compliance with the provisions of (i) the Delaware General Corporation Law relating to the filing of the Certificate of Merger and other appropriate merger documents, if any, and the approval of the Merger by the holders of 66-2/3% of the Stock (voting as one class, with each share of Stock having one (1) vote), (ii) the HSR Act and other Antitrust Laws, (iii) the Securities Act, (iv) the Exchange Act, (v) the "blue sky" laws of various states, and (vi) applicable alcohol beverage control and licensing laws and drug and pharmacy laws and regulations ("Alcohol and Drug Laws") and except as disclosed in Schedule 3.4 of the Disclosure Letter, the execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby will not: (1) violate any provision of the certificate of incorporation or by-laws (or other organizational document) of the Company or any of its subsidiaries; (2) violate any statute, ordinance, rule, regulation, order or decree of any court or of any governmental or regulatory body, agency or authority applicable to the Company or any of its subsidiaries or by which any of its respective properties or assets may be bound; (3) require the Company or any of its subsidiaries to make or obtain any filing with or permit, consent or approval or give any notice to, any governmental or regulatory body, agency or authority; or (4) result in a violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, payment or acceleration) under, or result in the crea- -12- tion of any Lien upon any of the properties or assets of the Company or any of its subsidiaries under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, franchise, permit, agreement, lease, franchise agreement, collective bargaining agreement or other agreement, instrument or obligation to which the Company or any of its subsidiaries is a party, or by which it or any of its respective properties or assets is bound, except for such filings, permits, consents or approvals the absence of which would not, or violations which would not, have a material adverse effect on the Condition of the Company and its subsidiaries, taken as a whole, or which could not reasonably be expected to prevent or materially delay consummation of the transactions contemplated by this Agreement. Section 3.5 Financial Statements. (a) The Company has heretofore -------------------- furnished Parent with the audited consolidated balance sheets of the Company and its subsidiaries as of February 3, 1996, February 1, 1997 and January 31, 1998 and the related consolidated statements of operations, shareholder's deficiency and cash flows for the fiscal years then ended, all certified by the Company's independent accountants, and the unaudited consolidated balance sheets of the Company and its subsidiaries as at October 31, 1998 and the related consolidated statements of operations, shareholders' deficiency and cash flows for the nine months then ended (the consolidated balance sheet of the Company and its subsidiaries as at January 31, 1998 is hereinafter referred to as the "Balance ------- Sheet" and January 31, 1998 as the "Balance Sheet Date" and the unaudited - ----- ------------------ consolidated balance sheet of the Company and its subsidiaries as at October 31, 1998 is hereinafter referred to as the "October Balance Sheet"). Such financial --------------------- statements, including the footnotes thereto, except as indicated therein, have been prepared in accordance with GAAP consistently applied throughout the periods indicated. (b) The Balance Sheet fairly presents, in all material aspects, and the financial statements of the Company, SMGH and Pathmark delivered to Parent pursuant to Section 5.7(b)(i) will fairly present, in all material respects, the consolidated financial condition of the Company, SMGH and, as the case may be, Pathmark and their respective subsidiaries at the date thereof and reflects or, as the case may be, will reflect all material claims against and all material debts and liabilities of the Company, SMGH and, as the case may be, Pathmark and their respective subsidiaries, fixed or contingent, as at the date thereof, and the related consolidated statements of operations, shareholders' deficiency and cash flows fairly present, in all material respects or, as the case may be, will fairly present, in all material respects, the consolidated results of operations and cash flows of the Company, SMGH and, as the case may be, Pathmark and their respective subsidiaries and the changes in their financial position for the period indicated. Subject to normal year end adjustments, the October Balance Sheet fairly presents, in all material respects, the consolidated financial position of the Company and its subsidiaries as at the date thereof and reflects all material claims and all material debts and liabilities of the Company and its subsidiaries, fixed or contingent, as at the date thereof and the related consolidated statements of operations, shareholder's deficiency and cash flows fairly present, in all material aspects, the consolidated results of operations and cash flows of the Company and its subsidiaries and the changes in their financial position for the period indicated. (c) The other balance sheets of the Company and its subsidiaries referred to in clause (a) above fairly present, in all material respects, the consolidated financial condition of the Company and its subsidiaries at the respective dates thereof and reflect all material claims and all -13- material debts and liabilities of the Company and its subsidiaries, fixed or contingent, as at the respective dates thereof, and the related consolidated statements of operations, shareholders' deficiency and cash flows fairly present, in all material respects, the consolidated results of the operations and cash flows of the Company and its subsidiaries and the changes in their financial position for the periods indicated. Section 3.6 Public Reports. (a) Since January 1, 1996 (the "Public -------------- ------ Disclosure Date"), each of SMGH and Pathmark has filed all forms, reports, - --------------- registration statements and other filings with the United States Securities and Exchange Commission (the "Commission") required to be filed by it pursuant to the federal securities laws and the Commission rules and regulations thereunder (such forms, reports, registration statements and other filings, together with any amendments thereto, are collectively referred to as the "Public Reports"), -------------- and the Public Reports filed with the Commission have complied in all material respects with all applicable requirements of the federal securities laws and the Commission rules and regulations thereunder. (b) As of their respective dates, the Public Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. Each of the audited consolidated balance sheets and the unaudited consolidated balance sheets (including any related notes and schedules) included in the Public Reports fairly present, in all material respects, the consolidated financial position of SMGH or, as the case may be, Pathmark and their respective subsidiaries, as of its date, and each of the consolidated statements of operations, shareholders' deficiency and cash flows included in the Public Reports (including any related notes and schedules) fairly present, in all material respects, the consolidated results of operation, cash flows and changes in financial position of SMGH or, as the case may be, Pathmark and their respective subsidiaries, for the period set forth therein (subject, where appropriate, to notes and normal year-end audit adjustments), in accordance with GAAP consistently applied throughout the periods indicated (except as may be indicated therein or in the notes or schedules thereto). Section 3.7 Absence of Certain Changes. Except as previously disclosed in -------------------------- the Public Reports or in Schedule 3.7 of the Disclosure Letter or as otherwise contemplated by this Agreement, since the Balance Sheet Date and up to and including the date hereof (i) there has not been any material adverse change in the Condition of the Company and its subsidiaries taken as a whole; (ii) the businesses of the Company and each of its subsidiaries have been conducted only in the ordinary course; (iii) neither the Company nor any of its subsidiaries has incurred any material liabilities (direct, contingent or otherwise) or engaged in any material transaction or entered into any material agreement other than in the ordinary course of business; (iv) neither the Company nor any of its subsidiaries has increased the compensation of any officer or granted any general salary or benefits increase to any of their employees other than in the ordinary course of business or pursuant to collective bargaining agreements; (v) there has been no declaration, setting aside or payment of any dividend or other distribution with respect to the capital stock of the Company or any of its subsidiaries; and (vi) there has been no change by the Company or any of its subsidiaries in accounting principles, practices or methods. -14- Section 3.8 Compliance with Laws. Except as disclosed in the Public -------------------- Reports filed on or prior to the date hereof, the Company and each of its subsidiaries is in compliance with all applicable laws, regulations, orders, judgments and decrees except where the failure to so comply would not, individually or in the aggregate, have a material adverse effect on the Condition of the Company and its subsidiaries taken as a whole or could reasonably likely prevent or materially delay consummation of the transactions contemplated by this Agreement. Section 3.9 Employee Benefit Plan Triggering Events. Except as set forth --------------------------------------- on Schedule 3.9 of the Disclosure Letter, the execution of this Agreement and the consummation of the transactions contemplated hereby do not constitute a triggering event under any Employee Benefit Plan, policy, arrangement, statement, commitment or agreement, whether or not legally enforceable, which will or may result in any payment, acceleration, vesting or increase in benefits to any employee or former employee, officer or director of the Company or any of its subsidiaries. "Employee Benefit Plan" shall mean any domestic or foreign (i) "employee --------------------- benefit plan," within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations thereunder ("ERISA"); (ii) bonus, stock option, stock purchase, restricted ----- stock, incentive, profit-sharing, pension or retirement, deferred compensation, medical, life, disability, accident, or welfare plans, programs, arrangements, commitments or practices (whether or not insured); and (iii) employment, consulting, termination and severance contracts or agreements for active, retired or former employees or directors, whether or not any such plans, programs, arrangements, commitments, contracts, agreements or practices referred to in (i), (ii) or (iii) are in writing or are otherwise exempt from the provisions of ERISA, established, maintained or contributed to (or with respect to which an obligation to contribute has been undertaken) or with respect to which any potential liability is borne by the Company or any of its subsidiaries (including, for the purposes of this Section 3.9, all employers (whether or not incorporated) that are by reason of common control treated together with the Company or any of is subsidiaries as a single employer within the meaning of Section 414 of the Code. Section 3.10 Liabilities. Except (i) as set forth in the Balance Sheet or ----------- referred to in the footnotes thereto, (ii) as set forth in the October Balance Sheet or referred to in the footnotes thereto, (iii) as set forth in the Public Reports, (iv) as disclosed in Schedule 3.10 of the Disclosure Letter, or (v) as otherwise contemplated by this Agreement, since the Balance Sheet Date and up to and including the date hereof, neither the Company nor any of its subsidiaries has incurred any material outstanding claims, liabilities or indebtedness (other than trade payables incurred in the ordinary course of business), contingent or otherwise, that would be required to be disclosed in the Company's consolidated financial statements prepared in accordance with GAAP consistently applied, other than (x) liabilities incurred subsequent to the Balance Sheet Date in the ordinary course of business not involving borrowings by the Company or any of its subsidiaries and (y) indebtedness incurred since the Balance Sheet Date pursuant to Pathmark's working capital facility (the "Working Capital Facility") ------------------------ as in effect as of the date hereof pursuant to the Credit Agreement among Pathmark, various banks, and The Chase Manhattan Bank, as Agent, dated as of June 30, 1997, as amended and restated (the "Credit Agreement"). ---------------- Section 3.11 Broker's or Finder's Fee. Except as set forth on Schedule ------------------------ 3.11 of the Disclosure Letter, no agent, broker, Person or firm acting on behalf of the Company or any of its -15- subsidiaries is, or will be, entitled to any fee, commission or broker's or finder's fees from any of the parties hereto, or from any Person controlling, controlled by, or under common control with any of the parties hereto, in connection with this Agreement or any of the transactions contemplated hereby. Section 3.12 State Takeover Statutes. The Board of Directors of the ----------------------- Company has approved the Merger and this Agreement. Section 203 of the Delaware General Corporation Law is inapplicable to the Merger, this Agreement and the entering into and performance by Parent and Sub of the Stockholders Agreement and the other transactions contemplated by this Agreement and the Stockholders Agreement. No other state takeover statute or similar statute or regulation applies to the Merger, this Agreement or the Stockholders Agreement. Section 3.13 Voting Requirements. The affirmative vote of the holders of ------------------- 66-2/3% of the Stock (voting as one class, with each share of Stock having one (1) vote) entitled to be cast approving this Agreement is the only vote of the holders of any class or series of Stock necessary to approve the Merger, this Agreement and the transactions contemplated by this Agreement. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB ------------------------------------------------ Section 4. Each of Parent and Sub hereby represents and warrants, jointly and severally, to the Company as follows: Section 4.1 Due Organization; Good Standing and Corporate Power. Parent is --------------------------------------------------- a public company with limited liability duly organized and validly existing under the laws of the Netherlands. Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Section 4.2 Authorization and Validity of Agreement. Each of Parent and --------------------------------------- Sub has full corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by each of Parent and Sub, and the consummation by each of them of the transactions contemplated hereby, have been duly authorized by each of the Executive and Supervisory Boards of Parent and the Board of Directors of Sub. No other corporate action on the part of either of Parent or Sub is necessary to authorize the execution, delivery and performance of this Agreement by each of Parent and Sub and the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by each of Parent and Sub and is a valid and binding obligation of each of Parent and Sub, enforceable against each of Parent and Sub in accordance with its terms, except that such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally, and general equitable principles (whether considered in a proceeding at law or in equity). -16- Section 4.3 Consents and Approvals; No Violations. Other than in ------------------------------------- connection with or in compliance with the provisions of (i) the Delaware General Corporation Law which relate to the filing of the Certificate of Merger and other appropriate merger documents, if any, and the approval of the Merger by the holders of 66-2/3% of the Stock (voting as one class with each share of Stock having one (1) vote), (ii) the HSR Act and other Antitrust Laws, (iii) the Securities Act, (iv) the Exchange Act, (v) the "blue sky" laws of various states, and (vi) applicable Alcohol and Drug Laws, the execution and delivery of this Agreement by Parent and Sub and the consummation by Parent and Sub of the transactions contemplated hereby will not: (1) violate any provision of the certificate of incorporation or by-laws of Parent or Sub; (b) violate any statute, ordinance, rule, regulation, order or decree of any court or of any governmental or regulatory body, agency or authority applicable to Parent or Sub or by which its properties or assets may be bound; (c) require Parent or Sub to make or obtain any filing with, or permit, consent or approval of, or give any notice to, any governmental or regulatory body, agency or authority; or (d) result in a violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, payment or acceleration) under, or result in the creation of any Lien upon any of the properties or assets of Parent or Sub under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, franchise, permit, agreement, lease, franchise agreement or other instrument or obligation to which Parent or Sub is a party or by which Parent or Sub or its properties or assets is bound, except for such filings, permits, consents or approvals the absence of which could not reasonably be expected to prevent or materially delay consummation of the transactions contemplated by this Agreement. Section 4.4 Broker's or Finder's Fee. No agent, broker, Person or firm ------------------------ acting on behalf of Parent or Sub is, or will be, entitled to any commission or broker's or finder's fees from any of the parties hereto, or from any Person controlling, controlled by, or under common control with any of the parties hereto, in connection with this Agreement or any of the transactions contemplated hereby. Section 4.5 Financing. Parent will provide, or cause to be provided to --------- Sub, the funds necessary to consummate the Merger and the transactions contemplated in accordance with the terms hereof. ARTICLE V COVENANTS --------- Section 5.1 Access to Information Concerning Properties and Records. ------------------------------------------------------- During the period commencing on the date hereof and ending on the Closing Date, the Company shall, and shall cause each of its subsidiaries to, upon reasonable notice, afford Parent, Sub and good faith potential purchasers of stores in connection with the obligations of the parties hereto pursuant to Section 5.8(b), and their respective counsel, accountants, consultants and other authorized representatives, reasonable access during normal business hours to the employees, properties, books and records of the Company and each of its subsidiaries in order that they may have the opportunity to make such reasonable investigations as they shall desire of the affairs of the Company -17- and each of its subsidiaries and other information concerning the business, properties and personnel of the Company and each of its subsidiaries as Parent and Sub may reasonably request, provided that Parent and Sub shall not have the -------- ---- right to conduct tests of the surface or subsurface soil and water beneath or about the real property owned or used by the Company or any of its subsidiaries. The Company shall, and shall cause each of its subsidiaries to, cause its officers and employees to furnish such additional financial and operating data and other information, and respond to such inquiries, as Parent and Sub shall from time to time reasonably request. Notwithstanding anything in this Section 5.1 to the contrary, neither the Company nor any of its subsidiaries shall be required to provide such access to or otherwise disclose such books, records or other information concerning their respective businesses to Parent or Sub as would violate Antitrust Laws. Section 5.2 Confidentiality. Each of Parent and Sub will hold and will --------------- cause its officers, employees, auditors and other agents, representatives and advisors to hold in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all documents and information concerning the Company or any of its subsidiaries furnished to Parent or Sub in connection with the transactions contemplated by this Agreement (except to the extent that such information can be shown to have been (i) previously known by Parent or Sub from sources other than the Company or any of its subsidiaries, or its directors, officers, auditors or other agents, representatives and advisors (ii) in the public domain through no fault of Parent or Sub or (iii) later lawfully acquired by Parent or Sub on a non- confidential basis from other sources who are not known by Parent or Sub to be bound by a confidentiality agreement or otherwise prohibited from transmitting the information to Parent or Sub by a contractual, legal or fiduciary obligation) and will not release or disclose such information to any other Person, except its auditors and other agents, representatives and advisors in connection with this Agreement who need to know such information. If the transactions contemplated by this Agreement are not consummated, such confidence shall be maintained for a period of two years from the date hereof and, if requested by or on behalf of Parent and Sub shall, and shall use all reasonable efforts to cause their auditors and other agents, representatives and advisors to, return to the Company or destroy all copies of written information furnished by the Company or any of its subsidiaries or its advisors to Parent and Sub or their auditors and other agents, representatives and advisors. It is understood that Parent and Sub shall be deemed to have satisfied their obligation to hold such information confidential if they exercise the same care as they take to preserve confidentiality for their own similar information. Section 5.3 Conduct of the Business of the Company and its Subsidiaries. ----------------------------------------------------------- Except as contemplated by this Agreement, during the period from the date of this Agreement until the Effective Time, the Company shall, and shall cause each of its subsidiaries to, conduct its operations in the ordinary course of business, consistent with past practice and to use its best efforts to (v) preserve intact its business organization, (w) maintain its material rights and franchises, (x) keep available the services of its officers and employees, (y) maintain satisfactory relationships with suppliers, distributors, customers and others having business relationships with it and (z) to take measures to reduce to zero any excess loss account (as determined in accordance with Treasury Regulations Sections 1.1502-14, 1.1502-19 and 1.1502-32) reflected on the books and records of the Company and its subsidiaries or as subsequently determined by the Company. Without limiting the generality of and in addition to the foregoing, except as set forth on Schedule -18- 5.3 of the Disclosure Letter and except as otherwise contemplated by this Agreement, prior to the time specified in the preceding sentence, the Company shall not, and shall cause each of its subsidiaries not to, without prior written consent of Parent: (a) amend its certificate of incorporation or by-laws or other organizational documents in any way; (b) authorize for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise) any stock of any class or any other securities other than shares of Class A Common Stock issuable pursuant to the terms of existing Management Options; (c) split, combine or reclassify any shares of its capital stock, declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock or redeem or otherwise acquire any of its securities; (d) (i) pledge or otherwise encumber shares of its capital stock; (ii) except in the ordinary course of business consistent with past practices (x) incur, assume or prepay any obligations with respect to any long-term debt, letters of credit or short-term debt, other than indebtedness (A) incurred, assumed or prepaid under the Working Capital Facility, (B) that is mandatorily prepayable in accordance with its terms and (C) that is intercompany indebtedness by and among any of the Company and any of its subsidiaries (other than SMGH or Pathmark Risk Management Corporation); (y) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for any material obligations of any other Person except any of its wholly-owned subsidiaries; or (z) make any material loans, advances or capital contributions to, or investments in, any other Person; or (iii) mortgage or pledge any of its assets or create or permit to exist any material lien thereupon that secures indebtedness for borrowed money; (e) except as required by law or existing written agreements, enter into, adopt or materially amend any bonus, profit sharing, compensation, severance, termination, stock option, stock appreciation right, restricted stock, performance unit, pension, retirement, deferred compensation, employment, severance or other employee benefit agreements, trusts, plans, funds or other arrangements of or for the benefit or welfare of any employee of the Company and its subsidiaries, or (except for normal increases in the ordinary course of business that are consistent with past practices) increase in any manner the compensation or fringe benefits of any such employee or pay any benefit not required by any existing plan and arrangement (including, without limitation, the granting of stock options, stock appreciation rights, shares of restricted stock or performance units) or enter into any contract, agreement, commitment or arrangement to do any of the foregoing; (f) transfer, sell, lease, license or dispose of any lines of business, subsidiaries, divisions, operating units or facilities outside the ordinary course of business or enter into any material commitment or transaction outside the ordinary course of business other than any such transactions between or among any of the Company and its subsidiaries (other than SMGH or Pathmark Risk Management Corporation); -19- (g) other than any such transactions between or among any of the Company and its subsidiaries (other than SMGH or, except with respect to any transaction intended to comply with Section 5.3(z), Pathmark Risk Management Corporation), acquire or agree to acquire, by merging or consolidating with, by purchasing an equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets of any other Person (other than the purchase of assets in the ordinary course of business and consistent with past practice), in each case where such action would be material to the Condition of the Company and its subsidiaries taken as a whole; (h) except as may be required by law or existing written contractual or collective bargaining agreements or in connection with the termination of any employee, take any action to terminate or materially amend, in a manner adverse to the Company or any of its subsidiaries, any of its pension plans or retiree medical plans with respect to or for the benefit of any employee of the Company or any of its subsidiaries; (i) materially modify, amend or terminate any significant contract to which it is a party or waive any of its material rights or claims except in the ordinary course of business consistent with past practice; (j) effect any material change in any of its methods of accounting, except as may be required by law or generally accepted accounting principles; (k) (i) take any action, engage in any transaction or enter into any agreement which would cause any of the representations or warranties set forth in Article III that are subject to, or qualified by, a "material adverse effect", "material adverse change" or other materiality qualification to be untrue as of the Effective Time, or any such representations and warranties that are not so qualified to be untrue in any respect which would otherwise have a material adverse effect on the Condition of the Company and its subsidiaries taken as a whole or (ii) purchase or acquire, or offer to purchase or acquire, any shares of capital stock of the Company; (l) take any action including, without limitation, the adoption of any shareholder rights plan or amendments to the Certificate of Incorporation, which would, directly or indirectly, restrict or impair the ability of Parent to vote, or otherwise to exercise the rights and receive the benefits of a stockholder with respect to, securities of the Company that may be acquired or controlled by Parent or Sub or permit any stockholder to acquire securities of the Company on a basis not available to Parent in the event that Parent were to acquire any shares of Stock; and (m) enter into a legally binding commitment with respect to, or any agreement to take, any of the foregoing actions. Notwithstanding anything else contained in this Section 5.3 to the contrary, the following shall be permitted: (1) the acquisition of direct or indirect interests in real property intended for the operation of stores of Pathmark or any of its subsidiaries (other than Pathmark Risk Management Corporation), the improvement of real property, the remodeling of stores of Pathmark or any of its subsidiaries (other than Pathmark Risk Management Corporation) and the -20- obtaining of financing therefor in the ordinary course of business consistent with past practice, (2) the negotiation and entering into by Pathmark or any of its subsidiaries (other than Pathmark Risk Management Corporation) of amendments to existing leases for real property in the ordinary course of business, (3) the negotiation in good faith and entering into new collective bargaining agreements by Pathmark that replace agreements that have expired or will expire pursuant to their terms within 90 days from the date of the commencement of negotiations, (4) the marketing and sale of certain real estate not used in the supermarket business by Pathmark or any of its subsidiaries (other than Pathmark Risk Management Corporation) as set forth on Schedule 5.3 of the Disclosure Letter, provided that no such sale (other than a sale pursuant to a binding agreement - -------- ---- that the Company is a party to on the date hereof) shall be agreed to without prior adequate consultation with Parent, (5) entering into of amendments to the Credit Agreement to modify covenants as required (other than modifications, except for a possible increase in the interest rate, which will make any one or more covenants more restrictive) and (6) entering into an agreement implementing the amendments to the Supply Agreement agreed to in a memorandum of understanding effective December 27, 1998 by and between Pathmark and C&S Wholesale Grocers, Inc. Section 5.4 Stockholder Approval. Promptly after the execution of this -------------------- Agreement, the Company, acting through its Board of Directors, shall, in accordance with applicable law, (i) call a special meeting of the holders of Stock for the purpose of voting upon this Agreement and the Merger, submit this Agreement and the Merger at such special meeting and use its reasonable efforts to solicit in writing proxies in favor of this Agreement and the Merger from all holders of Stock or (ii) use its reasonable efforts to solicit in writing the consent to this Agreement and the Merger from all holders of Stock. The Company shall include in its written proxy solicitation or, as the case may be, consent solicitation the recommendation of its Board of Directors that holders of Stock approve and adopt this Agreement and approve the Merger and take all other lawful action necessary and advisable to secure the vote or, as the case may be, consent of holders of 66-2/3% of the Stock (voting as one class, with each share having one (1) vote) in favor of the Merger and this Agreement. Section 5.5 Best Efforts. Subject to the terms and conditions provided ------------ herein, each of the Company, Parent and Sub shall, and the Company shall cause each of its subsidiaries to, cooperate and use their respective best efforts to take, or cause to be taken, all appropriate action, and to make, or cause to be made, all filings necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including, without limitation, their respective best efforts to obtain, prior to the Closing Date, all licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts with the Company or any of its subsidiaries as are necessary for consummation of the transactions contemplated by this Agreement and to fulfill the conditions to the Merger; provided, however, that no loan -------- ------- ---- agreement or contract for borrowed money shall be repaid except as currently required by its terms, in whole or in part, and no material contract shall be amended to increase the amount payable thereunder or otherwise to be materially more burdensome to the Company or any of its subsidiaries in order to obtain any such consent, approval or authorization without first obtaining the written approval of Parent. -21- Section 5.6 No Solicitation of Other Offers. (a) The Company shall not, ------------------------------- and the Company shall cause each of its subsidiaries not to, directly or indirectly, take (or authorize or permit their respective officers, directors, employees, representatives, consultants, investment bankers, attorneys, accountants or other agents or Affiliates, to so take) any action to (i) solicit, initiate or encourage the submission of any Acquisition Proposal, (ii) enter into an agreement of merger or other business combination or an agreement for the sale or other disposition by the Company or any of its subsidiaries of a material amount of assets or a sale of shares of capital stock whether by merger or other business combination or tender or exchange offer or (iii) participate in any way in discussions or negotiations with, or furnish any information to, any Person (other than Parent or Sub) 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. "Acquisition Proposal" shall mean any proposed merger or other business -------------------- combination, sale or other disposition of any material amount of assets, sale of shares of capital stock, tender offer or exchange offer or similar transactions involving the Company or any of its subsidiaries. (b) The Board of Directors of the Company shall not take any action to withdraw or modify in a manner adverse to Parent or Sub, or take a position inconsistent with, its approvals or recommendation of the Merger, this Agreement or the Stockholders Agreement or to recommend another Acquisition Proposal and shall not resolve to do any of the foregoing. (c) In addition to the obligations of the Company set forth in paragraph (a), the Company shall, and the Company shall cause each of its subsidiaries to, promptly advise Parent of any request for information or of any Acquisition Proposal, or any proposal with respect to any Acquisition Proposal, the material terms and conditions of such Acquisition Proposal, and the identity of the Person making any such Acquisition Proposal or inquiry. (d) Immediately following the execution of this Agreement, the Company shall, and shall cause each of its subsidiaries and each of their respective officers, directors, employees, representatives, consultants, investment bankers, attorneys, accountants or other agents or Affiliates to, cease any existing discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal and request each Person which has heretofore executed a confidentiality agreement in connection with its consideration of acquiring the Company or any of its subsidiaries or any portion thereof to return all confidential information heretofore furnished to such Person by or on behalf of the Company or any of its subsidiaries. Section 5.7 Notification of Certain Matters. (a) The Company shall give ------------------------------- prompt notice to Parent of any notice of, or other communication relating to, a material default or event that, with notice or lapse of time or both, would become a material default, received by the Company subsequent to the date of this Agreement and prior to the Effective Time, under any material contract to which the Company or any of its subsidiaries is a party or is subject. The Company and Parent shall give prompt notice to each other of (i) any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by this Agreement and (ii) the occurrence or non-occurrence of any events the occurrence or non-occurrence of which would cause either (w) a representation or -22- warranty contained in this Agreement, in any Schedule to the Disclosure Letter or in any certificate delivered pursuant to this Agreement and not qualified by any materiality standard, to be untrue or inaccurate in any material respect, (x) any other representation or warranty contained in this Agreement, in any schedule to the Disclosure Letter or in any certificate delivered pursuant to this Agreement, to be untrue or inaccurate in any respect, (y) any of the conditions set forth in Article VI or VII to be unsatisfied in any material respect at the Effective Time; provided that the parties hereto need not give -------- ---- notice with respect to events that are reported in the financial or general interest newspapers that do not specifically relate to the Company, any of its subsidiaries or Parent or their respective businesses or (z) any failure to comply with or satisfy any covenants, condition or agreement to be complied with or satisfied by it hereunder. (b) The Company shall provide Parent with (i) the audited consolidated balance sheet of the Company, SMGH and, as the case may be, Pathmark, and their respective subsidiaries as of January 30, 1999 and the related statements of operations, shareholder's deficiency and cash flows for the fiscal year then ended, all as certified by the Company's, SMGH's and, as the case may be, Pathmark's independent accountants, within three (3) business days after preparation and certification thereof, (ii) the unaudited consolidated balance sheet of each of the Company, SMGH and Pathmark, and the related consolidated statements of operations, shareholders' deficiency and cash flows for each fiscal quarter ending prior to the Effective Time, within forty-five days after the end of each such fiscal quarter and (iii) the unaudited statement of operations of Pathmark for each fiscal month ending prior to the Effective Time, within thirty days after the end of each such fiscal month. In addition, subject to compliance with the Antitrust Laws, the Company shall cause Pathmark to deliver to Parent on a weekly basis its internal sales overview reports promptly as they are prepared by Pathmark for each such week. Section 5.8 Antitrust Filings. (a) Parent, Sub and the Company shall (i) ----------------- take promptly all actions necessary to make the filings required of Parent, Sub or any of their Affiliates under the applicable Antitrust Laws (as such term is defined in Section 5.8(d)), (ii) comply at the earliest practicable date with any request for additional information or documentary material received by Parent, the Company or any of their respective Affiliates from the Federal Trade Commission or the Antitrust Division of the Department of Justice pursuant to the HSR Act and (iii) cooperate in connection with any filing under applicable Antitrust Laws and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by this Agreement commenced by any of the Federal Trade Commission, the Antitrust Division of the Department of Justice or state attorneys general. (b) Each of the Company, Parent and Sub shall use all best efforts to resolve such objections, if any, as may be asserted with respect to the Merger, the Stockholders Agreement or any other transaction contemplated by this Agreement under any Antitrust Law. If any administrative, judicial or legislative action or proceeding is instituted (or threatened to be instituted) challenging the Merger, the Stockholders Agreement or any other transaction contemplated by this Agreement as violative of any Antitrust Law, the Company, Parent and Sub shall cooperate to contest and resist any such action or proceeding, and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order (whether temporary, preliminary or permanent) that is in effect and that restricts, prevents or prohibits consummation of the Merger, -23- the Stockholders Agreement or any other transactions contemplated by this Agreement, including, without limitation, by pursuing all reasonable avenues of administrative and judicial appeal. (c) Each of the Company, Parent and Sub shall promptly inform each other of any material communication made to, or received by such party from, the Federal Trade Commission, the Antitrust Division of the Department of Justice or any other governmental or regulatory authority regarding any of the transactions contemplated hereby. (d) "Antitrust Law" means the Sherman Act, as amended, the Clayton Act, as ------------- amended, the HSR Act, the Federal Trade Commission Act, as amended, and all other federal and state statutes, rules, regulations, orders, decrees, administrative and judicial doctrines, and other laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade. Section 5.9 Transfer Taxes. The Company and Parent shall cooperate in the -------------- preparation, execution and filing of all returns, questionnaires, applications or other documents regarding any real property transfer or gains, sales, use, transfer, value added, stock transfer and stamp taxes, any transfer, recording, registration and other fees and any similar taxes which become payable in connection with the transactions contemplated by this Agreement (together with any related interest, penalties or additions to tax, "Transfer Taxes"). All -------------- Transfer Taxes shall be paid by the Company and expressly shall not be a liability of any holder of Stock. Section 5.10 SMGH Preferred Stock Tender Offer. (a) Immediately after --------------------------------- execution of this Agreement, Sub shall, and Parent shall cause Sub to, make a public announcement pursuant to Rule 14d-2b under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and, promptly thereafter, but in no event ------------ later than the fifth (5th) business day following the date thereof, commence the Tender Offer to purchase, subject to holders of shares of SMGH Preferred Stock having tendered and not withdrawn at least 66 2/3% of the issued and outstanding shares of SMGH Preferred Stock (the "Minimum Condition") and the fulfillment of ----------------- the other conditions set forth on Exhibit 1 (collectively, the "Tender Offer ------------ Conditions"), all of the issued and outstanding shares of SMGH Preferred Stock - ---------- at the Tender Offer Price per Share. Sub shall not, and Parent shall cause Sub not to, change the Tender Offer Price per Share without the prior written consent of the Company. In addition, Sub shall not, and Parent shall cause Sub not to, amend, change or waive any of the Tender Offer Conditions without the prior written consent of the Company. (b) As soon as reasonably practical on the date the Tender Offer is commenced, Sub shall, and Parent shall cause Sub to, file with the Commission a Tender Offer Statement on Schedule 14d-1 with respect to the Tender Offer (together with all amendments and supplements thereto and including the exhibits thereto, the "Schedule 14D-1") which will include (as exhibits) or incorporate -------------- by reference an offer to purchase and a form of letter of transmittal with respect to the Tender Offer as well as all other information and exhibits required by law (collectively, together with any amendments and supplements thereto, the "Offer Documents"). Parent and Sub represent and warrant that the --------------- Offer Documents will comply in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder, and all other applicable United States federal securities laws and, on the date filed with the Commission and on the date first published, sent or given to the holders of shares of SMGH Preferred Stock, will not contain -24- any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by Parent and Sub with respect to information supplied in writing by the Company for inclusion in the Schedule 14D-1 or the Offer Documents. Sub shall, and Parent shall cause Sub to, take all steps necessary to cause the Offer Documents to be filed with the Commission and to be disseminated to all holders of shares of SMGH Preferred Stock, in each case as and to the extent required by applicable United States federal securities laws and any other applicable laws. Sub shall, and Parent shall cause Sub to, promptly correct any information provided by it for use in the Offer Documents if and to the extent that such information shall have become false and misleading in any material respect, and Sub shall, and Parent shall cause Sub to, take all steps necessary to cause the Offer Documents, as so corrected, to be filed with the Commission and to be disseminated to holders of shares of SMGH Preferred Stock, in each case as and to the extent required by applicable United States federal securities laws and any other applicable laws. The Company shall be given the opportunity to review and comment on the Offer Documents before they are filed with the Commission. In addition, Sub shall, and Parent shall cause Sub to, provide to the Company and its counsel copies of any written comments Parent or Sub may receive from time to time from the Commission or its staff with respect to the Offer Documents, promptly after receipt of such comments and provide the Company and its counsel an opportunity to participate, including by participating with Sub and its counsel in any discussions with the Commission or its staff, in the response of Sub to such comments. (c) The Company hereby represents and warrants that the Board of Directors of SMGH (at a meeting duly called and held) has (i) determined by the unanimous vote of the directors that each of the Tender Offer and the Second Step Merger (as such term is defined in Section 5.11) is fair to, and in the best interests of, the holders of shares of SMGH Preferred Stock, (ii) approved the Tender Offer and the Second Step Merger in accordance with the provisions of the Delaware General Corporation Law and (iii) recommended acceptance of the Tender Offer. The Company shall cause SMGH to file with the Commission, as soon as practicable on the date of the commencement of the Tender Offer, a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all amendments and supplements thereto, the "Schedule 14D-9"), containing the -------------- recommendations referred to in the preceding sentence and shall disseminate the Schedule 14D-9 as required by Rule 14d-9 under the Exchange Act. Parent and its counsel shall be given the opportunity to review and comment upon the Schedule 14D-9 prior to its filing with the Commission. The Company represents and warrants that the Schedule 14D-9 will comply in all material respects with the provisions of applicable federal securities laws and, on the date filed with the Commission and on the date first published, sent or given to the holders of SMGH Preferred Stock, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by the Company with respect to information supplied by Parent or Sub in writing for inclusion in the Schedule 14D-9. The Company shall cause SMGH to provide Parent and its counsel with any comments SMGH or its counsel may receive from the Commission or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments and shall provide Parent and its counsel an opportunity to participate, including by participating with SMGH and its -25- counsel in any discussions with the Commission or its staff, in the response by SMGH to such comments. In connection with the Tender Offer, the Company shall cause SMGH to promptly furnish Sub with mailing labels, security position listings and any available listing or computer list containing the names and addresses of the record holders of shares of SMGH Preferred Stock as of the most recent practicable date and shall furnish Sub with such additional information (including, but not limited to, updated lists of holders of shares of SMGH Preferred Stock and their addresses, mailing labels and lists of security positions) and such other assistance as Sub or its agents may reasonably request in communicating the Tender Offer to the holders of shares of SMGH Preferred Stock. Section 5.11 Merger of SMG-II and SMGH. In the event that the shares of ------------------------- SMGH Preferred Stock tendered and accepted for payment in the Tender Offer do not constitute all of the issued and outstanding shares of SMGH Preferred Stock, Parent shall, promptly after the Closing (but in any event not prior to receipt of any required approval of the stockholders of SMGH) cause SMGH to merge with and into SMG-II (the "Second Step Merger") pursuant to an Agreement and Plan of ------------------ Merger in substantially the form attached hereto as Exhibit 2. Section 5.12 Employee Benefits. During the period commencing at the ----------------- Effective Time and ending on the first anniversary thereof, Parent shall cause the current and former employees of Pathmark and its subsidiaries who are on the Closing Date entitled to receive compensation or any benefits from Pathmark or any of its subsidiaries to be provided with compensation and employee benefit plans (other than stock option or other plans involving the potential issuance of securities of the Company, Parent or any of their respective subsidiaries, and incentive compensation or similar programs) which in the aggregate are not materially less favorable than those currently provided to such employees by Pathmark and its subsidiaries, to the extent permitted under laws and regulations in force from time to time, provided that employees covered by -------- ---- collective bargaining agreements need not be provided with such benefits, and provided, further, that Parent reserves the right to review all employee - -------- ------- ---- benefits after the Effective Time and to make such changes as it deems appropriate. Section 5.13 Directors' and Officers' Insurance; Indemnification. (a) The --------------------------------------------------- certificate of incorporation and the by-laws of the Surviving Corporation shall contain the provisions with respect to indemnification and exculpation from liability set forth in the Company's certificate of incorporation and by-laws on the date of this Agreement, which provisions shall not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would adversely affect the rights thereunder of individuals who on or prior to the Effective Time were directors, officers, employees or agents of the Company, unless such modification is required by law. Parent agrees that all rights of indemnification now existing in favor of any director, officer, employee, or agent of the subsidiaries of the Company as provided in their respective charters or by-laws on the date of this Agreement shall survive the Merger and shall continue in full force and effect for a period of six years from the Effective Time. (b) The Surviving Corporation shall for the six year period commencing on the Effective Time either (x) maintain in effect the Company's current directors' and officers' liability insurance covering those Persons who are currently covered on the date of this Agreement by the Company's directors' and officers' liability insurance policy (a copy of which has been heretofore -26- delivered to Parent) (the "Indemnified Parties"); provided, however, that in no ------------------- -------- ------- event shall Parent be required to expend in any one year an amount in excess of 150% of the annual premiums currently paid by the Company for such insurance which the Company represents to be $323,000; provided further, that if the ---------------- ---- annual premiums of such insurance coverage exceed such amount, the Surviving Corporation shall be obligated to obtain a policy with the greatest coverage available for a cost not exceeding such amount; provided further, that the ---------------- ---- Surviving Corporation may substitute for the Company policies, policies with at least the same coverage containing terms and conditions which are no less advantageous and provided that said substitution does not result in any gaps or lapses in coverage with respect to matters occurring prior to the Effective Time or (y) cause the Parent's directors' and officers' liability insurance then in effect to cover those Persons who are covered on the date of this Agreement by the Company's directors' and officers' liability insurance policy with respect to those matters covered by the Company's directors' and officers' liability policy. (c) Parent agrees to indemnify, and to cause the Surviving Corporation to indemnify, all Indemnified Parties to the fullest extent permitted by applicable law with respect to all acts and omissions arising out of such individuals' services as officers, directors, employees or agents of the Company or any of its subsidiaries or as trustees or fiduciaries of any plan for the benefit of employees of the Company or any of its subsidiaries, occurring prior to the Effective Time including, without limitation, the transactions contemplated by this Agreement. Without limitation of the foregoing, in the event any such Indemnified Party is or becomes involved in any capacity in any action, proceeding or investigation in connection with any matter, including without limitation, the transactions contemplated by this Agreement, occurring prior to, and including, the Effective Time, Parent, from and after the Effective Time, will pay as incurred such Indemnified Party's reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith. Subject to Section 5.13(d) below, Parent shall pay all reasonable expenses, including attorneys' fees, that may be incurred by any Indemnified Party in enforcing this Section 5.13 or any action involving an Indemnified Party resulting from the transactions contemplated by this Agreement. If the indemnity provided for in this Section 5.13 is not available with respect to any Indemnified Party, then the Surviving Corporation and the Indemnified Party shall contribute to the amount payable in such proportion as is appropriate to reflect relative faults and benefits. (d) Any Indemnified Party wishing to claim indemnification under paragraph (a) or (c) of this Section 5.13, upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify Parent thereof. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), (i) Parent or the Surviving Corporation shall have the right, from and after the Effective Time, to assume the defense thereof (with counsel engaged by Parent or the Surviving Corporation to be reasonably acceptable to the relevant Indemnified Party) and Parent shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof, (ii) such Indemnified Party will cooperate in the defense of any such matter and (iii) Parent or the Surviving Corporation shall not be liable for any settlement effected without its prior written consent; and provided further that Parent shall not have any obligation hereunder to any Indemnified Party when and if a court of competent jurisdiction shall -27- ultimately determine, and such determination shall have become final, that the indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable law. ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND SUB ----------------------------------------------------- Section 6. Conditions Precedent to Obligations of Parent and Sub. The ----------------------------------------------------- respective obligations of Parent and Sub to effect the Merger are subject to the satisfaction or waiver (subject to applicable law) at or prior to the Closing of each of the following conditions: Section 6.1 Truth of Representations and Warranties. Each representation --------------------------------------- or warranty of the Company contained in this Agreement that is subject to, or qualified by, "material adverse effect", "material adverse change" or other materiality qualification shall be true and correct, in each case as if such representation or warranty was made at the Closing, and any representation or warranty that is not so qualified shall be true and correct in any respect which would otherwise have a material adverse effect on the Condition of the Company and its subsidiaries taken as a whole, in each case as if such representation or warranty was made at the Closing except as to any such representation or warranty which speaks as of a specific date or for a specific period, which must be true and correct in the foregoing respects as of such specific date or period, and Parent shall have received a certificate signed by an executive officer of the Company, dated the Closing Date, to such effect. Section 6.2 Performance of Agreements. The Company shall have performed ------------------------- in all material respects all obligations and complied in all material respects with all agreements and covenants to be performed or complied with by it under this Agreement and, in the case only of failures to perform any agreement or covenant of the Company pursuant to Section 5.3 (other than clause (c) thereof), such failure to perform did or would not have a material adverse effect on the Condition of the Company and its subsidiaries taken as a whole or materially adversely effect the ability of Parent or Sub to consummate the transactions contemplated by this Agreement or have a material adverse effect on the value of the Company and its subsidiaries taken as a whole and Parent shall have received a certificate signed by an executive officer of the Company, dated the Closing Date, to such effect. Section 6.3 Approval of Company's Stockholders. This Agreement and the ---------------------------------- Merger shall have been approved and adopted by holders of 66-2/3% of the Stock (voting as one class, with each share of Stock having one (1) vote) in accordance with applicable law, the Certificate of Incorporation and By-Laws of the Company and the Company's Stockholders' Agreement. Holders of shares of Stock representing in the aggregate not more than 5% of the amount that would be payable by Parent or Sub pursuant to Section 2.5 if there would be no Dissenting Stockholders shall (i) have perfected their appraisal rights under Section 262 of the Delaware General Corporation Law or (ii) be entitled after the Closing to so perfect their appraisal rights. Section 6.4 HSR Act. Any waiting period (and any extension thereof) under ------- the HSR Act applicable to the Merger shall have expired or been terminated. -28- Section 6.5 Injunction. No preliminary or permanent injunction or other ---------- order shall have been issued by any court or by any governmental or regulatory agency, body or authority which prohibits, restrains, enjoins or restricts the consummation of the Merger, or the Tender Offer and which is in effect at the Closing, provided that, in the case of a decree, injunction or other order, each -------- ---- of the parties shall have used all reasonable efforts to prevent the entry of any such injunction or other order and to appeal as promptly as possible any decree, injunction or other order that may be entered. Section 6.6 SMGH Preferred Stock Tender Offer. The Tender Offer --------------------------------- Conditions including, without limitation, the Minimum Condition shall have been fulfilled without any waiver thereof. Section 6.7 Statutes. No statute, rule, regulation, executive order, -------- decree or order of any kind shall have been enacted, entered, promulgated or enforced by any court or governmental authority which prohibits, restrains, enjoins or restricts the consummation of the Merger or the Tender Offer or has the effect of making the Merger or the Tender Offer illegal. Section 6.8 Company Stockholders' Agreement. The Company Stockholders' ------------------------------- Agreement shall have been terminated. Section 6.9 No Material Adverse Effect. Since the date hereof, no event -------------------------- shall have occurred such that there would be a material adverse change in the Condition of the Company and its subsidiaries taken as a whole. Section 6.10 Fulfillment of Company Conditions. Parent shall have --------------------------------- received an irrevocable letter from the Company, signed by an executive officer of the Company, stating that all of the conditions to the obligations of the Company to effect the Merger set forth in Article VII have been satisfied or waived. ARTICLE VII CONDITIONS PRECEDENT TO THE ---------------------------- OBLIGATIONS OF THE COMPANY -------------------------- Section 7. Conditions Precedent to Obligations of the Company. The -------------------------------------------------- obligations of the Company to effect the Merger is subject to the satisfaction, at or prior to the Closing, of each of the following conditions: Section 7.1 Truth of Representations and Warranties. The representations --------------------------------------- and warranties of Parent and Sub contained in this Agreement shall be true and correct in all material respects as if such representations and warranties were made at the Closing, and the Company shall have received a certificate signed by an executive officer of Parent, dated the Closing Date, to such effect. Section 7.2 Performance of Agreements. Each of Parent and Sub shall have ------------------------- performed in all material respects all obligations and complied in all materials respects with all agreements and covenants to be performed and complied with by it under this Agreement, and the Company shall -29- have received a certificate signed by an executive officer of Parent, dated the Closing Date, to such effect. Section 7.3 HSR Act Waiting Periods. All applicable waiting periods under ----------------------- the HSR Act with respect to the transactions contemplated by this Agreement shall have expired or been terminated. Section 7.4 Injunction. No preliminary or permanent injunction or other ---------- order shall have been issued by any court or by any governmental or regulatory agency, body or authority which prohibits, restrains, enjoins or restricts the consummation of the Merger or the Tender Offer which is in effect at the Closing, provided that, in the case of a decree, injunction or other order, each -------- ---- of the parties shall have used all reasonable efforts to prevent the entry of any such injunction or other order and to appeal as promptly as possible any decree, injunction or other order that may be entered. Section 7.5 Approval of Company's Stockholders. This Agreement and the ---------------------------------- Merger shall have been approved and adopted by holders of 66-2/3% of the Stock (voting as one class, with each share of Stock having one (1) vote) in accordance with applicable law (if required by applicable law), the Certificate of Incorporation and By-Laws of the Company and the Company Stockholders' Agreement. Section 7.6 Statutes. No statute, rule, regulation, executive order, -------- decree or order of any kind shall have been enacted, entered, promulgated or enforced by any court or governmental authority which prohibits, restrains, enjoins or restricts the consummation of the Merger or the Tender Offer or has the effect of making the Merger or the Tender Offer illegal. ARTICLE VIII TERMINATION AND ABANDONMENT Section 8.1 Termination. This Agreement may be terminated and the ----------- transactions contemplated hereby may be abandoned, at any time prior to the Closing, whether before or after approval of the Merger by the holders of Stock: (a) by mutual written consent of the Company, on the one hand, and of Parent, on the other hand; (b) by either Parent, on the one hand, or the Company, on the other hand, if any governmental or regulatory agency shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the Merger and such order, decree or ruling or other action shall have become final and nonappealable; provided, however, that in the event this -------- ------- ---- Agreement is terminated because of such an order, decree, ruling or other action with respect to the Tender Offer, the Company and Parent shall, and the Company and Parent shall cause Sub and PTK to, effect the "Closing" pursuant to, subject to the terms and conditions of and as defined in the Alternative Stock Purchase Agreement; -30- (c) by either Parent, on the one hand, or the Company, on the other hand, if the Closing shall not have occurred by December 15, 1999, unless the Closing shall not have occurred because of a material breach of any representation, warranty, obligation, covenant, agreement or condition set forth in this Agreement on the part of the party seeking to terminate this Agreement; (d) by Parent, if any of the conditions set forth in Section 6.6, 6.5 or 6.7 (to the extent that the latter two sections relate to the Tender Offer) are not satisfied immediately prior to the date on which the Closing would have taken place but for the failure of any of the conditions set forth in Sections 6.6, 6.5 or Section 6.7 (to the extent that the latter two sections relate to the Tender Offer) to be satisfied, in which case the Company and Parent shall, and the Company and Parent shall cause Sub and PTK to, effect the "Closing" pursuant to, subject to the terms and conditions of and as defined in the Alternative Stock Purchase Agreement; and (e) by Parent, at any time within 30 days after delivery to it pursuant to Section 5.7(b)(i) of the audited consolidated financial statements of each of the Company and of Pathmark for the fiscal year ended January 30, 1999, in the event that such financial statements disclose (i) a consolidated shareholder's deficiency of (x) the Company greater than $1,453,000,000 or (y) Pathmark greater than $1,188,400,000, in each case as of the end of such fiscal year or (ii) net losses of (x) the Company materially greater than $29,321,000 or (y) Pathmark materially greater than $28,420,000, in each case for the fiscal year then ended. Section 8.2 Effect of Termination. In the event of the termination of --------------------- this Agreement pursuant to Section 8.1 (other than in the case of termination pursuant to Section 8.1(a)) hereof by Parent, on the one hand, or the Company, on the other hand, written notice thereof shall forthwith be given to the other party specifying the provision hereof pursuant to which this Agreement is terminated, and this Agreement shall become void and have no effect, and there shall be no liability hereunder on the part of Parent, Sub or the Company, except that Sections 3.12, 5.2, 5.3(l), 8.1(d) 9.1, 9.5 and this Section 8.2 shall survive any termination of this Agreement. Nothing in this Section 8.2 shall relieve any party to this Agreement of liability for breach of this Agreement. ARTICLE IX MISCELLANEOUS Section 9.1 Fees and Expenses. All costs and expenses incurred in ----------------- connection with this Agreement and the consummation of the transactions contemplated hereby shall be paid by the party incurring such costs and expenses. Section 9.2 Representations and Warranties. The respective ------------------------------ representations and warranties of the Company, on the one hand, and Parent and Sub, on the other hand, contained herein or in any certificates or other documents delivered prior to or at the Closing shall not be deemed waived or otherwise affected by any investigation made by any party. Each and every such representation and warranty shall expire with, and be terminated and extinguished by, the Closing and thereafter none of the Company, Parent or Sub shall be under any liability whatsoever -31- with respect to any such representation or warranty. This Section 9.2 shall have no effect upon any other obligation of the parties hereto, whether to be performed before or after the Closing. Section 9.3 Extension; Waiver. At any time prior to the Effective Time, ----------------- the parties hereto, by action taken by or on behalf of the respective Boards of Directors of the Company, Parent or Sub, may (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein by any other applicable party or in any document, certificate or writing delivered pursuant hereto by any other applicable party or (iii) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. Section 9.4 Public Announcements. The Company, on the one hand, and -------------------- Parent and Sub, on the other hand, agree to consult promptly with each other prior to issuing any press release or otherwise making any public statement with respect to the transactions contemplated hereby, and shall not issue any such press release or make any such public statement prior to such consultation and review by the other party of a copy of such release or statement, unless required by applicable law. Section 9.5 Governing Law. This Agreement, and the legal relations ------------- between the parties hereto, shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements executed and to be performed solely within such State, provided, however, that any of the -------- ------- provisions contained herein with respect to the Merger shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements executed and to be performed solely within such State. Section 9.6 Captions. The Article and Section captions used herein are -------- for reference purposes only, and shall not in any way affect the meaning or interpretation of this Agreement. Section 9.7 Notices. Any notice, delivery or other communication required ------- or permitted under this Agreement shall be sufficiently given if delivered in person or sent by telecopy (with receipt confirmed) or by registered or certified mail, postage prepaid, addressed as follows: If to either Parent or Sub: Koninklijke Ahold NV Albert Heijnweg 1 1507 EH Zaandam, P.O. Box 33 1500 EA Zaandam, The Netherlands Telecopier: 31-75-659-83-66 Attention: Paul P.J. Butzelaar, Esq. Ton van Tielraden, Esq. and White & Case 1155 Avenue of the Americas -32- New York, New York 10036 Telecopier: (212) 354-8113 Attention: John M. Reiss, Esq. If to the Company: SMG-II Holdings Corporation 200 Milik Street Carteret, NJ 07008-1194 Telecopier: (732) 499-3460 Attention: James Donald Marc A. Strassler, Esq. with a copy to: Shearman & Sterling 599 Lexington Avenue New York, NY 10022-7179 Telecopier: (212) 848-7179 Attention: Spencer D. Klein, Esq. Rohan Weerasinghe, Esq. or to such other person as shall be designated in writing by any such party, and such notice or communication shall be deemed to have been given as of the date so delivered, sent by telecopier or mailed. Section 9.8 Binding Effect; Benefit; Assignment. This Agreement shall ----------------------------------- inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties; provided, however, that Sub may assign and -------- ------- ---- delegate, in its sole discretion, its rights, interests and obligations hereunder to any direct or indirect wholly-owned subsidiary of Parent. Notwithstanding anything contained in this Agreement to the contrary, except for the provisions of Section 2.5 and Section 5.13 (collectively, the "Third Party ----------- Provisions"), nothing in this Agreement, expressed or implied, is intended to - ---------- confer on any Person other than the parties hereto or their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. The Third Party Provisions may be enforced by the beneficiaries thereof. Section 9.9 Counterparts. This Agreement may be executed in two or more ------------ counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. -33- Section 9.10 Entire Agreement. This Agreement, including the other ---------------- documents entered into in connection herewith, contains the entire understanding of the parties hereto with respect to the subject matter contained herein and therein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. Section 9.11 Amendments. This Agreement may not be changed, amended, ---------- waived, or modified orally, but only by an agreement in writing signed by the parties hereto. Section 9.12 Severability. If any term or other provision of this ------------ Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon a determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the maximum extent possible. Section 9.13 Disclosure Letter. The parties hereto acknowledge that ----------------- certain matters set forth in the Disclosure Letter are included for informational purposes only, notwithstanding the fact that, because they do not rise above applicable materiality thresholds or otherwise, they would not be required to be set forth therein by the terms of this Agreement and that disclosure of such matters shall not be taken as an admission by the Company that such disclosure is required to be made under the terms of any provision of this Agreement. Section 9.14 Submission to Jurisdiction; Waiver of Jury Trial. The ------------------------------------------------ parties hereby submit to the jurisdiction of the United States District Court for the Southern District of New York and of any New York State Court sitting in the City of New York for purposes of all legal proceedings which may arise hereunder or under any of the other documents entered into in connection herewith. The parties irrevocably waive, to the fullest extent permitted by law, any objection which it may have or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. The parties hereby consent to process being served in any such proceeding by the mailing of a copy thereof by registered or certified mail, postage prepaid, to their respective addresses specified in Section 9.7 or in any other manner permitted by law. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER DOCUMENTS ENTERED INTO IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OF ANY PARTY. -34- IN WITNESS WHEREOF, each party has caused its corporate name to be hereunto subscribed by its officer thereunto duly authorized, all as of the day and year first above written. KONINKLIJKE AHOLD N.V. By: /s/ Robert G. Tobin -------------------------------- Name: R.G. Tobin Title: Executive Vice President AHOLD ACQUISITION, INC. By: /s/ Robert G. Tobin -------------------------------- Name: R.G. Tobin Title: President Title: SMG-II HOLDINGS CORPORATION By: /s/ James L. Donald -------------------------------- Name: James L. Donald Title: Chairman, President and Chief Executive Officer -35- EXECUTION COPY EXHIBIT 1 --------- The capitalized terms used in this Exhibit 1 shall have the meanings set forth in the Merger Agreement to which it is annexed, except that the term "Merger Agreement" shall be deemed to refer to the Agreement to which this Exhibit 1 is appended and "Purchaser" shall be deemed to refer to Sub. - -------------------------------------------------------------------------------- Notwithstanding any other provision of the Tender Offer or the Merger Agreement, Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the Commission, including Rule 14e-1c under the Exchange Act (relating to Purchaser's obligation to pay for or return tendered shares promptly after termination or withdrawal of the Tender Offer), pay for any shares of SMGH Preferred Stock tendered and may terminate or amend the Tender Offer and may postpone the acceptance of, and payment for, shares of SMGH Preferred Stock, if there shall not have been validly tendered and not withdrawn prior to the expiration of the Tender Offer a number of shares of SMGH Preferred Stock which, together with SMGH Preferred Stock previously acquired by Parent, any direct or indirect subsidiary of Parent, the Company, any direct or indirect subsidiary of the Company or Purchaser, represent 66 2/3% of the total issued and outstanding shares of SMGH Preferred Stock on a fully diluted basis (the "Minimum Condition"), or at any time at or before the time of acceptance of tendered shares of SMGH Preferred Stock for payment or payment for any such shares of SMGH Preferred Stock (whether or not any shares of SMGH Preferred Stock have theretofore been accepted for payment or paid for pursuant to the Tender Offer) any of the following shall occur: (a)(i) the Board of Directors of SMGH or any committee thereof shall have withdrawn or modified in a manner adverse to Parent or Purchaser the approval or recommendation of the Tender Offer or approved or recommended any takeover proposal with respect to SMGH or any of its subsidiaries or for any acquisition of any capital stock of SMGH or any of its subsidiaries (other than the Tender Offer or the Merger), (ii) the Board of Directors of the Company or any committee thereof shall have withdrawn or modified in a manner adverse to Parent or Purchaser the approval or recommendation of the Merger or the Merger Agreement, or approved or recommended any takeover proposal with respect to the Company or any of its subsidiaries or any acquisition of any Exhibit 1 capital stock of the Company or any of its subsidiaries (other than the Merger), (iii) any Person shall have entered into a definitive agreement or an agreement in principle with the Company, SMGH or, as the case may be, any of their respective subsidiaries with respect to a tender offer or exchange offer for any capital stock of the Company, SMGH or, as the case may be, any of their respective subsidiaries or a merger, consolidation or other business combination with or involving the Company, SMGH or, as the case may be, any of their respective subsidiaries or (iv) the Board of Directors of the Company, SMGH or, as the case may be, any of their respective subsidiaries or any committee of any of them shall have resolved to do any of the foregoing; (b) any condition in the Merger Agreement to the consummation of the Merger shall not have been met; or (c) the Merger Agreement shall have been terminated in accordance with its terms; which, in the reasonable judgment of Purchaser, in any such case and regardless of the circumstances giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payment. The foregoing conditions (including those set forth in the opening paragraph above) are for the sole benefit of Purchaser and may be asserted by Purchaser, or may be waived by Purchaser, in whole or in part at any time and from time to time in its sole discretion. The failure by Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. -2- EXECUTION COPY EXHIBIT 2 --------- to Agreement and Plan of Merger ------------------------------- ================================================================================ AGREEMENT AND PLAN OF MERGER BY AND AMONG PATHMARK HOLDINGS CORPORATION AND SUPERMARKETS GENERAL HOLDINGS CORPORATION Dated as of [_________] ================================================================================ TABLE OF CONTENTS ----------------- Page ---- ARTICLE I THE MERGER AND RELATED MATTERS....................................... 1 1.1 The Merger................................................. 1 1.2 Conversion of Stock........................................ 2 1.3 Dissenting Stock........................................... 2 1.4 Surrender of Certificates.................................. 3 1.5 Payment.................................................... 4 1.6 No Further Rights of Transfers............................. 5 1.7 Certificate of Incorporation of the Surviving Corporation.. 5 1.8 By-Laws of the Surviving Corporation....................... 5 1.9 Directors and Officers of the Surviving Corporation........ 5 ARTICLE II MISCELLANEOUS........................................................ 6 2.1 Fees and Expenses.......................................... 6 2.2 Notices.................................................... 6 2.3 Entire Agreement........................................... 6 2.4 Binding Effect; Benefit; Assignment........................ 6 2.5 Amendment and Modification................................. 7 2.6 Further Actions............................................ 7 2.7 Headings................................................... 7 2.8 Counterparts............................................... 7 2.9 Applicable Law............................................. 7 2.10 Severability.............................................. 7 2.11 Submission to Jurisdiction Waiver of Jury Trial........... 8 (i) [Draft: (New York) March 9, 1999] EXHIBIT 2 --------- to Agreement and Plan of Merger ------------------------------- AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of [________] (this "Agreement"), by and among PATHMARK HOLDINGS CORPORATION, a Delaware corporation ("Pathmark"), and SUPERMARKETS GENERAL HOLDINGS CORPORATION, a Delaware corporation ("SMGH"). Terms used and not otherwise defined herein shall have the meanings ascribed to them in the First Step Merger Agreement (as defined below). WHEREAS, Koninklijke Ahold N.V. ("Parent") has acquired (the "Acquisition") (x) control of Pathmark pursuant to an Agreement and Plan of Merger, dated as of March [ ], 1999, by and among, Parent, Ahold Acquisition Inc. and Pathmark (formerly known as SMG-II Holdings Corporation) (the "First Step Merger Agreement") and (y) [______] shares of SMGH Preferred Stock; WHEREAS, to complete the Acquisition, the respective Boards of Directors of Pathmark and SMGH unanimously determined that the merger of SMGH with and into Pathmark (the "Merger") is fair to, and in the best interests of, the holders of capital stock of each of Pathmark and SMGH, approved the Merger and recommended the approval and adoption of this Agreement by the holders of capital stock of each of Pathmark and SMGH; and WHEREAS, at duly called and convened meetings of the holders of all classes of capital stock of each of Pathmark and SMGH, the holders of each class of capital stock of each of Pathmark and SMGH by requisite majority approved the Merger. NOW, THEREFORE, in consideration of the premises and of the mutual covenants, representations, warranties and agreements herein contained, the parties hereto agree as follows: ARTICLE I THE MERGER AND RELATED MATTERS 1.1 The Merger. (a) On the date hereof Pathmark and SMGH shall ---------- prepare, execute and acknowledge a certificate of merger (the "Certificate of Merger") in accordance with the Delaware General Corporation Law and shall cause the Certificate of Merger to be filed with the Secretary of State of the State of Delaware as provided in Section 251 of the Delaware General Corporation Law. The Merger shall become effective upon the filing of the Certificate of Merger (or at such later time reflected in the Certificate of Merger as shall be agreed by Pathmark and SMGH). The date and time when the Merger shall become effective is hereinafter referred to as the "Effective Time." (b) At the Effective Time, SMGH shall be merged with and into Pathmark and the separate corporate existence of SMGH shall cease, and Pathmark shall continue as the surviving Exhibit 2 --------- to Agreement and Plan of Merger ------------------------------- corporation under the laws of the State of Delaware under the name of "Pathmark Holdings Corporation" (the "Surviving Corporation"). (c) From and after the Effective Time, the Merger shall have the effects set forth in Section 259(a) of the Delaware General Corporation Law. (d) If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to continue in, vest, perfect or confirm of record or otherwise in the Surviving Corporation's right, title or interest in, to or under any of the rights, properties, privileges, franchise or assets of either of its constituent corporations acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger, or otherwise to carry out the intent of this Agreement, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of either of the constituent corporations of the Merger, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of each of such corporations or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties, privileges, franchises or assets in the Surviving Corporation (as defined) or otherwise to carry out the intent of this Agreement. 1.2 Conversion of Stock. At the Effective Time: ------------------- (a) Each share of Class A Common Stock of SMGH then issued and outstanding and each share of Class B Common Stock of SMGH then issued and outstanding shall be cancelled without payment to the holders thereof. Each share of SMGH Preferred Stock then issued and outstanding (other than (i) any shares of SMGH Preferred Stock which are held by any subsidiary of SMGH or in the treasury of SMGH, or which are held, directly or indirectly, by Parent or any direct or indirect subsidiary of Parent (including Pathmark), all of which shall cease to be outstanding and be cancelled and retired and none of which shall receive any payment with respect thereto and (ii) shares of SMGH Preferred Stock held by Dissenting Stockholders (as such term is defined in Section 1.3 hereof)) and all rights in respect thereof shall, by virtue of the Merger and without any action on the part of Pathmark, SMGH or the holder thereof, forthwith cease to exist and be converted into and represent the right to receive an amount in cash, without interest, equal to $38.25 (the "Merger Consideration"); and (b) Each share of common stock, par value $0.01 per share, of Pathmark then issued and outstanding shall, by virtue of the Merger and without any action on the part of Pathmark, SMGH or the holder thereof, become one fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation. 1.3 Dissenting Stock. Notwithstanding anything contained in this ---------------- Agreement to the contrary but only to the extent required by the Delaware General Corporation Law, shares of SMGH Preferred Stock that are issued and outstanding immediately prior to the Effective Time -2- Exhibit 2 --------- to Agreement and Plan of Merger ------------------------------- and are held by holders of SMGH Preferred Stock who comply with all the provisions of the law of the State of Delaware concerning the right of holders of preferred stock to dissent from the Merger and require appraisal of their shares of SMGH Preferred Stock ("Dissenting Stockholders") shall not be converted into the right to receive the Merger Consideration but shall become the right to receive such consideration as may be determined to be due such Dissenting Stockholder pursuant to the law of the State of Delaware; provided, -------- however, that (i) if any Dissenting Stockholder shall subsequently deliver a - ------- written withdrawal of his or her demand for appraisal (with the written approval of the Surviving Corporation, if such withdrawal is not tendered within 60 days after the Effective Time), or (ii) if any Dissenting Stockholder fails to establish and perfect his or her entitlement to appraisal rights as provided by applicable law, or (iii) if within 120 days of the Effective Time neither any Dissenting Stockholder nor the Surviving Corporation has filed a petition demanding determination of the value of all shares of SMGH Preferred Stock outstanding at the Effective Time and held by Dissenting Stockholders in accordance with applicable law, then such Dissenting Stockholder or Dissenting Stockholders, as the case may be, shall forfeit the right to appraisal of such shares and such shares shall thereupon be deemed to have been converted into the right to receive, as of the Effective Time, the Merger Consideration, without interest. SMGH shall give Pathmark (A) prompt notice of any written demands for appraisal, withdrawals of demands for appraisal and any other related instruments received by SMGH, and (B) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal. SMGH will not, except with the prior written consent of Pathmark, voluntarily make any payment with respect to any demands for appraisal or settle or offer to settle any such demand. 1.4 Surrender of Certificates. (a) Prior to the Effective Time, ------------------------- Pathmark shall designate a bank or trust company located in the United States to act as paying agent (the "Paying Agent") for purposes of making the cash payments contemplated hereby. As soon as practicable after the Effective Time, Pathmark shall cause the Paying Agent to mail and/or make available to each holder of a certificate theretofore evidencing shares of SMGH Preferred Stock (other than those which are held by any subsidiary of SMGH or in the treasury of SMGH or which are held directly or indirectly by Parent or any direct or indirect subsidiary (including Pathmark) of Parent) a notice and letter of transmittal advising such holder of the effectiveness of the Merger and the procedure for surrendering to the Paying Agent such certificate or certificates which immediately prior to the Effective Time represented outstanding SMGH Preferred Stock (the "Certificates") in exchange for the Merger Consideration deliverable in respect thereof pursuant to this Article I. Upon the surrender for cancellation to the Paying Agent of such Certificates, together with a letter of transmittal, duly executed and completed in accordance with the instructions thereon, and any other items specified by the letter of transmittal, the Paying Agent shall promptly pay to the person entitled thereto the Merger Consideration deliverable in respect thereof. Until so surrendered, each Certificate shall be deemed, for all corporate purposes, to evidence only the right to receive upon such surrender the Merger Consideration deliverable in respect thereof to which such Person is entitled pursuant to this Article I. No interest shall be paid or accrued in respect of such cash payments. -3- Exhibit 2 --------- to Agreement and Plan of Merger ------------------------------- (b) If the Merger Consideration (or any portion thereof) is to be delivered to a person other than the person in whose name the Certificates surrendered in exchange therefor are registered, it shall be a condition to the payment of the Merger Consideration that the Certificates so surrendered shall be properly endorsed or accompanied by appropriate stock powers and otherwise in proper form for transfer, that such transfer otherwise be proper and that the Person requesting such transfer pay to the Paying Agent any transfer or other taxes payable by reason of the foregoing or establish to the satisfaction of the Paying Agent that such taxes have been paid or are not required to be paid. (c) In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed, the Paying Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration deliverable in respect thereof as determined in accordance with this Article I, provided that, the person to whom the Merger Consideration is paid shall, as a condition precedent to the payment thereof, give the Surviving Corporation a bond in such sum as it may direct or otherwise indemnify the Surviving Corporation in a manner satisfactory to it against any claim that may be made against the Surviving Corporation with respect to the Certificate claimed to have been lost, stolen or destroyed. 1.5 Payment. Concurrently with or immediately prior to the Effective ------- Time, Pathmark shall deposit in trust with the Paying Agent cash in United States dollars in an aggregate amount equal to the product of (i) the number of shares of SMGH Preferred Stock outstanding immediately prior to the Effective Time (other than shares of SMGH Stock Preferred which are held by any subsidiary of SMGH or in the treasury of SMGH or which are held directly or indirectly by Parent or any direct or indirect subsidiary (including Pathmark) of Parent or a person known at the time of such deposit to be a Dissenting Stockholder) and (ii) the Merger Consideration (such amount being hereinafter referred to as the "Payment Fund"). The Payment Fund shall be invested by the Paying Agent as directed by Pathmark in direct obligations of the United States, obligations for which the full faith and credit of the United States is pledged to provide for the payment of principal and interest, commercial paper of an issuer organized under the laws of a state of the United States rated of the highest quality by Moody's Investors Services, Inc. or Standard & Poor's Ratings Group or certificates of deposit, bank repurchase agreements or bankers' acceptances of a United States commercial bank having at least $100,000,000 in assets (collectively "Permitted Investments") or in money market funds which are invested in Permitted Investments, and any net earnings with respect thereto shall be paid to Pathmark as and when requested by Pathmark. The Paying Agent shall, pursuant to irrevocable instructions, make the payments referred to in Section 1.2(a) hereof out of the Payment Fund. The Payment Fund shall not be used for any other purpose. Promptly following the date which is six months after the Effective Time, the Paying Agent shall return to the Surviving Corporation all cash, certificates and other instruments in its possession that constitute any portion of the Payment Fund, (other than net earnings on the Payment Fund which shall be paid to Pathmark) and the Paying Agent's duties shall terminate. Thereafter, each holder of a Certificate may surrender such Certificate to -4- Exhibit 2 --------- to Agreement and Plan of Merger ------------------------------- the Surviving Corporation and (subject to applicable abandoned property, escheat and similar laws) receive in exchange therefor the Merger Consideration, without interest, but shall have no greater rights against the Surviving Corporation or Pathmark than may be accorded to general creditors of the Surviving Corporation or Pathmark under applicable law. Notwithstanding the foregoing, neither the Paying Agent nor any party hereto shall be liable to a holder of shares of SMGH Preferred Stock for any Merger Consideration delivered to a public official pursuant to applicable abandoned property, escheat and similar laws. 1.6 No Further Rights of Transfers. At and after the Effective Time, ------------------------------ each holder of a Certificate shall cease to have any rights as a stockholder of SMGH, except for, in the case of a holder of a Certificate (other than shares of capital stock to be cancelled pursuant to Section 1.2(a) hereof and other than shares held by Dissenting Stockholders), the right to surrender his or her Certificate in exchange for payment of the Merger Consideration or, in the case of a Dissenting Shareholder, to perfect his or her right to receive payment for his or her shares pursuant to Delaware law if such holder has validly perfected and not withdrawn or otherwise lost his or her right to receive payment for his or her shares, and no transfer of shares of SMGH Preferred Stock shall be made on the stock transfer books of the Surviving Corporation. Certificates presented to the Surviving Corporation after the Effective Time shall be cancelled and exchanged for cash as provided in this Article I. At the close of business on the day of the Effective Time the stock ledger of SMGH with respect to capital stock of SMGH shall be closed. 1.7 Certificate of Incorporation of the Surviving Corporation. The --------------------------------------------------------- Certificate of Incorporation of Pathmark, as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation. 1.8 By-Laws of the Surviving Corporation. The By-Laws of Pathmark, ------------------------------------ as in effect immediately prior to the Effective Time, shall be the By-Laws of the Surviving Corporation. 1.9 Directors and Officers of the Surviving Corporation. At the --------------------------------------------------- Effective Time, the directors of Pathmark immediately prior to the Effective Time shall be the directors of the Surviving Corporation, each of such directors to hold office, subject to the applicable provisions of the Certificate of Incorporation and By-Laws of the Surviving Corporation, until the next annual shareholders' meeting of the Surviving Corporation and until their respective successors shall be duly elected or appointed and qualified. At the Effective Time, the officers of Pathmark immediately prior to the Effective Time shall, subject to the applicable provisions of the Certificate of Incorporation and By- Laws of the Surviving Corporation, be the officers of the Surviving Corporation until their respective successors shall be duly elected or appointed and qualified. -5- Exhibit 2 --------- to Agreement and Plan of Merger ------------------------------- ARTICLE II MISCELLANEOUS 2.1 Fees and Expenses. (a) All costs and expenses incurred in ----------------- connection with this Agreement and the consummation of the transactions contemplated hereby shall be paid by the party incurring such costs and expenses. 2.2 Notices. All notices, requests, demands, waivers and other ------- communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if delivered in person or mailed, certified or registered mail with postage prepaid, or sent by telex, telegram or telecopier, as follows: (a) if to Pathmark, to it at: _____________________ _____________________ _____________________ (b) if to SMGH, to it at: _______________________ _______________________ _______________________ (c) if to the Surviving Corporation, to it at: _______________________ _______________________ _______________________ or to such other person or address as any party shall specify by notice in writing to each of the other parties. All such notices, requests, demands, waivers and communications shall be deemed to have been received on the date of delivery unless if mailed, in which case on the third business day after the mailing thereof except for a notice of a change of address, which shall be effective only upon receipt thereof. 2.3 Entire Agreement. This Agreement contains the entire ---------------- understanding of the parties hereto with respect to the subject matter contained herein and supersedes all prior agreements and understandings, oral and written, with respect to such subject matter. 2.4 Binding Effect; Benefit; Assignment. This Agreement shall inure ----------------------------------- to the benefit of and be binding upon the parties hereto, but neither this Agreement nor any of the rights, -6- Exhibit 2 --------- to Agreement and Plan of Merger ------------------------------- interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Notwithstanding anything contained in this Agreement to the contrary, except for the provisions of Section 2.5 (the "Third ----- Party Provision"), nothing in this Agreement, expressed or implied, is intended - --------------- to confer on any person other than the parties hereto or their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. The Third Party Provisions may be enforced by the beneficiaries thereof. 2.5 Amendment and Modification. Subject to applicable law, this -------------------------- Agreement may be amended, modified and supplemented in writing by the parties hereto in any and all respects before the Effective Time (notwithstanding any stockholder approval), by action taken by the respective Boards of Directors of Pathmark and SMGH or by the respective officers authorized by such Boards of Directors, provided, however, that (i) no amendment may be made which decreases -------- ------- the Merger Consideration or which adversely effects the rights of the Dissenting Stockholders without the approval of such stockholders and (ii) after any such stockholder approval, no amendment shall be made which by law requires further approval by such stockholders without such further approval. 2.6 Further Actions. Each of the parties hereto agrees that, subject --------------- to its legal obligations, it will use its best efforts to fulfill all conditions precedent specified herein, to the extent that such conditions are within its control, and to do all things reasonably necessary to consummate the transactions contemplated hereby. 2.7 Headings. The descriptive headings of the several Articles and -------- Sections of this Agreement are inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement. 2.8 Counterparts. This Agreement may be executed in several ------------ counterparts, each of which shall be deemed to be an original, and all of which together shall be deemed to be one and the same instrument. 2.9 Applicable Law. This Agreement, and the legal relations between -------------- the parties hereto, shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements executed and to be performed solely within such State, provided, however, that any of the -------- ------- provisions contained herein with respect to the Merger shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements executed and to be performed solely within such State. 2.10 Severability. If any term, provision, covenant or restriction ------------ contained in this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable or against its regulatory policy, 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. -7- Exhibit 2 --------- to Agreement and Plan of Merger ------------------------------- 2.11 Submission to Jurisdiction Waiver of Jury Trial. The parties ----------------------------------------------- hereby submit to the jurisdiction of the United States District Court for the Southern District of New York and of any New York State Court sitting in the City of New York for purposes of all legal proceedings which may arise hereunder or under any of the other documents entered into in connection herewith. The parties irrevocably waive, to the fullest extent permitted by law, any objection which it may have or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. The parties hereby consent to process being served in any such proceeding by the mailing of a copy thereof by registered or certified mail, postage prepaid, to their respective addresses specified in Section 2.2 or in any other manner permitted by law. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER DOCUMENTS ENTERED INTO IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OF ANY PARTY. -8- Exhibit 2 --------- to Agreement and Plan of Merger ------------------------------- IN WITNESS WHEREOF, each of the Parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, all as of the date first above written. PATHMARK HOLDINGS CORPORATION By: ------------------------------------ Name: Title: SUPERMARKETS GENERAL HOLDINGS CORPORATION By: ------------------------------------ Name: Title: -9- EX-99.(C)(4) 14 STOCK PURCHASE AGREEMENT DATED 03/09/99 Exhibit (c)(4) EXECUTION COPY ================================================================================ STOCK PURCHASE AGREEMENT BY AND AMONG KONINKLIJKE AHOLD N.V. AHOLD ACQUISITION, INC. SMG-II HOLDINGS CORPORATION and PTK HOLDINGS, INC. Dated as of March 9, 1999 ================================================================================ TABLE OF CONTENTS -----------------
Page ---- ARTICLE I DEFINITIONS..............................................................................................1 Section 1. Definitions.....................................................................1 ARTICLE II PURCHASE AND SALE OF STOCK...............................................................................4 Section 2.1 Purchase and Sale of Stock......................................................4 Section 2.2 Purchase Price..................................................................4 Section 2.3 Payment of Purchase Price.......................................................4 Section 2.4 Closing.........................................................................5 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLERS ...........................................................5 Section 3. Representations and Warranties of the Sellers....................................5 Section 3.1 DueOrganization, Good Standing and Corporate Power..............................5 Section 3.2 Authorizationand Validity of Agreement..........................................5 Section 3.3 Capitalization..................................................................6 Section 3.4 Consents and Approvals; No Violations...........................................6 Section 3.5 Public Reports..................................................................7 Section 3.6 Other Financial Statements......................................................7 Section 3.7 Absence of Certain Changes......................................................8 Section 3.8 Compliance with Laws............................................................8 Section 3.9 Employee Benefit Plan Triggering Events.........................................8 Section 3.10 Liabilities....................................................................9 Section 3.11 Broker's or Finder's Fee.......................................................9 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.........................................................9 Section 4.1 Due Organization; Good Standing and Corporate Power.............................9 Section 4.2 Authorization and Validity of Agreement........................................10 Section 4.3 Consents and Approvals; No Violations..........................................10 Section 4.4 Broker's or Finder's Fee.......................................................10 Section 4.5 Financing......................................................................10
(i) ARTICLE V COVENANTS................................................................................................11 Section 5.1 Access to Information Concerning Properties and Records.........................11 Section 5.2 Confidentiality.................................................................11 Section 5.3 Conduct of the Business of the Company and its Subsidiaries.....................12 Section 5.4 Best Efforts....................................................................14 Section 5.5 No Solicitation of Other Offers.................................................15 Section 5.6 Notification of Certain Matters.................................................15 Section 5.7 Antitrust Filings...............................................................16 Section 5.8 Transfer Taxes..................................................................17 Section 5.9 Employee Benefits...............................................................17 Section 5.10 Directors' and Officers' Insurance; Indemnification............................17 ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF SUB...............................................................19 Section 6. Conditions Precedent to Obligations of Parent and Sub...........................19 Section 6.1 Truth of Representations and Warranties.........................................19 Section 6.2 Performance of Agreements.......................................................19 Section 6.3 HSR Act.........................................................................19 Section 6.4 Injunction......................................................................19 Section 6.5Statutes.............................................................................20 Section 6.6 No Material Adverse Effect......................................................20 ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS...............................................................................20 Section 7. Conditions Precedent to Obligations of the Sellers..............................20 Section 7.1 Truth of Representations and Warranties.........................................20 Section 7.2 Performance of Agreements.......................................................20 Section 7.3 HSR Act Waiting Periods.........................................................20 Section 7.4 Injunction......................................................................20 Section 7.5 Statutes........................................................................20 ARTICLE VIII TERMINATION AND ABANDONMENT..............................................................................21 Section 8.1 Termination.....................................................................21 Section 8.2 Automatic Termination...........................................................21 Section 8.3 Effect of Termination...........................................................21
(ii) ARTICLE IX TAX MATTERS..............................................................................................22 Section 9.1 Tax Returns.....................................................................22 Section 9.2 Payment of Taxes................................................................22 Section 9.3 Controversies...................................................................23 Section 9.4 Amended Returns.................................................................23 Section 9.5 Prior Tax Agreements............................................................24 Section 9.6 Post-Closing Access and Cooperation.............................................24 ARTICLE X MISCELLANEOUS............................................................................................24 Section 10.1 Fees and Expenses.............................................................24 Section 10.2 Representations and Warranties................................................24 Section 10.3 Extension; Waiver.............................................................24 Section 10.4 Public Announcements..........................................................25 Section 10.5 Governing Law.................................................................25 Section 10.6 Captions......................................................................25 Section 10.7 Notices.......................................................................25 Section 10.8 Binding Effect; Benefit; Assignment...........................................26 Section 10.9 Counterparts..................................................................26 Section 10.10 Entire Agreement..............................................................26 Section 10.11 Amendments....................................................................27 Section 10.12 Severability..................................................................27 Section 10.13 Disclosure Letter.............................................................27 Section 10.14 Submission to Jurisdiction; Waiver of Jury Trial..............................27
(iii) EXECUTION COPY STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT, dated as of March 9, 1999 (this "Agreement"), by --------- and among KONINKLIJKE AHOLD N.V., a company organized under the laws of the Netherlands ("Parent"), AHOLD ACQUISITION, INC., a company organized under the ------ laws of Delaware and an indirect wholly-owned subsidiary of Parent ("Sub"), SMG- --- II HOLDINGS CORPORATION, a company organized under the laws of Delaware ("SMG- --- II") AND PTK HOLDINGS, INC., a company organized under the laws of Delaware - -- ("PTK"). --- W I T N E S S E T H : -------------------- WHEREAS, Parent, Sub and SMG-II have entered into an Agreement and Plan of Merger (the "Merger Agreement") pursuant to which it is contemplated that Sub ---------------- merges with and into SMG-II (the "Merger"); ------ WHEREAS, in contemplation of the Merger, Sub will make a tender offer (the "Tender Offer") to purchase all of the issued and outstanding $3.52 Cumulative ------------ Exchangeable Preferred Stock, par value $0.01 per share, of Supermarkets General Holdings Corporation, a company organized under the laws of Delaware, subject to the terms and conditions of the Merger Agreement and certain other conditions, at a price of $38.25 per share, net to the Seller in cash; WHEREAS, the parties hereto have agreed that, in the event certain conditions in connection with the Tender Offer set forth in the Merger Agreement are not satisfied, SMG-II shall in the alternative cause PTK to sell, and Sub shall in the alternative purchase, an aggregate of 100 shares of Common Stock, par value $.10 per share (the "Stock"), of Pathmark Stores, Inc., a company ----- organized under the laws of Delaware (the "Company"), being all of the issued ------- and outstanding shares of capital stock of the Company, all in accordance with this Agreement. NOW, THEREFORE, IT IS AGREED: ARTICLE I DEFINITIONS ----------- Section 1. Definitions. When used in this Agreement, the following terms ----------- shall have the respective meanings specified therefor below (such meanings to be equally applicable to both the singular and plural forms of the terms defined). "Acquisition Proposal" shall have the meaning assigned to such term in -------------------- Section 5.5(a). "Affiliate" of any Person shall mean any Person directly or indirectly --------- controlling, controlled by, or under common control with, such Person; provided -------- that, for the purposes of this definition, "control" (including, with - ---- correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or partnership interests, by contract or otherwise. "Agreement" shall have the meaning assigned to such term in the preamble to --------- this Agreement. "Alcohol and Drug Laws" shall have the meaning assigned to such term in --------------------- Section 3.4. "Antitrust Law" shall have the meaning assigned to such term in Section ------------- 5.7(d). "Balance Sheet" shall have the meaning assigned to such term in Section ------------- 3.6(a). "Balance Sheet Date" shall have the meaning assigned to such term in ------------------ Section 3.6(a). A "business day" shall mean any day, other than a Saturday, Sunday or a day ------------ on which banks located in New York City and Amsterdam shall be authorized or required by law to close. "Closing" shall have the meaning assigned to such term in Section 2.4. ------- "Closing Date" shall have the meaning assigned to such term in Section 2.4. ------------ "Code" shall mean the Internal Revenue Code of 1986, as amended from time ---- to time and the Treasury regulations promulgated and the rulings issued thereunder. "Commission" shall have the meaning assigned to such term in Section ---------- 3.5(a). "Company" shall have the meaning assigned to such term in the third recital ------- to this Agreement. "Condition" shall mean, with respect to any Person the business, --------- properties, assets, liabilities, results of operations or condition (financial or otherwise) of such Person. "Credit Agreement" shall have the meaning assigned to such term in Section ---------------- 3.10. "Disclosure Letter" shall mean that certain Disclosure Letter, dated the ----------------- date hereof, delivered by the Company to the Purchaser concurrently with the execution of this Agreement. "Employee Benefit Plan" shall have the meaning assigned to such term in --------------------- Section 3.9. "ERISA" shall have the meaning assigned to such term in Section 3.9. ----- "GAAP" shall mean generally accepted accounting principles of the United ---- States of America. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of ------- 1976, as amended, and the rules and regulations thereunder. -2- "Indemnified Parties" shall have the meaning assigned to such term in ------------------- Section 5.10(b). "Liens" shall mean, collectively, liens, security interests, options, ----- rights of first refusal, easements, mortgages, charges, indentures, deeds of trust, rights of way, restrictions on the use of real property, encroachments, licenses to third parties, leases to third parties, security agreements, or any other encumbrances and other restrictions or limitations on use of real or personal property. "Merger" shall have the meaning assigned to such term in the first recital ------ to this Agreement. "Merger Agreement" shall have the meaning set forth in the first recital to ---------------- this Agreement. "Merger Closing" shall mean the "Closing", as such term is defined in the -------------- Merger Agreement. "October Balance Sheet" shall have the meaning assigned to such term in --------------------- Section 3.6(a). "Parent" shall have the meaning assigned to such term in the preamble to ------ this Agreement. "Person" shall mean and include an individual, a partnership, a joint ------ venture, a corporation, a limited liability company, a limited liability partnership, a trust, an incorporated organization and a government or other department or agency thereof. "PTK" shall have the meaning assigned to such term in the preamble to this --- Agreement. "Pre-Closing Period" shall have the meaning assigned to such term in ------------------ Section 9.1. "Public Disclosure Date" shall have the meaning assigned to such term in ---------------------- Section 3.5(a). "Public Reports" shall have the meaning assigned to such term in Section -------------- 3.5(a). "Purchase Price" shall have the meaning assigned to such term in Section -------------- 2.2. "Returns" shall have the meaning assigned to such term in Section 9.1. ------- "Sellers" shall mean, collectively, SMG-II and PTK. ------- "SMG-II" shall have the meaning assigned to such term in the preamble to ------ this Agreement. "SMG-II Group" shall have the meaning assigned to such term in Section 9.2. ------------ "Stock" shall have the meaning assigned to such term in the third recital ----- to this Agreement. "Sub" shall have the meaning assigned to such term in the preamble to this --- Agreement. -3- "Supply Agreement" shall mean the First Amended and Restated Supply ---------------- Agreement dated January 29, 1998, by and between the Company and C&S Wholesale Grocers, Inc. "Tax" or "Taxes" shall mean all taxes, assessments, charges, duties, fees, --- ----- levies or other governmental charges including, without limitation, all Federal, state, local, foreign and other income, franchise, profits, capital gains, capital stock, transfer, sales, use, occupation, property, excise, severance, windfall profits, stamp, license, payroll, withholding and other taxes, assessments, charges, duties, fees, levies or other governmental charges of any kind whatsoever (whether payable directly or by withholding and whether or not requiring the filing of a return), all estimated taxes, deficiency assessments, additions to tax, penalties and interest and any liability for any such amounts as a result either of being a member of a combined, consolidated, unitary or affiliated group or of a contractual obligation to indemnify any Person. "Tax Matter" shall have the meaning assigned to such term in Section 9.3. ---------- "Tender Offer" shall have the meaning assigned to such term in the second ------------ recital to this Agreement. "Third Party Provisions" shall have the meaning assigned to such terms in ---------------------- Section 10.8. "Transfer Taxes" shall have the meaning assigned to such term in Section -------------- 5.8. "Working Capital Facility" shall have the meaning assigned to such term in ------------------------ Section 3.10. ARTICLE II PURCHASE AND SALE OF STOCK -------------------------- Section 2.1 Purchase and Sale of Stock. Upon the terms and subject to the -------------------------- conditions set forth in this Agreement, PTK shall, and SMG-II shall cause PTK to, sell, assign, transfer and deliver to Sub at the Closing, and Sub shall purchase from PTK at the Closing, the Stock. The certificate or certificates representing the Stock shall be duly endorsed in blank, or accompanied by stock powers duly executed in blank, by PTK, with all necessary transfer tax and other revenue stamps, acquired at the Sellers' expense, affixed and canceled. The Sellers agree to cure any deficiencies with respect to the endorsement of the certificates representing the Stock or with respect to the stock powers accompanying any such certificates. Section 2.2 Purchase Price. The purchase price to be paid by Sub for the -------------- Stock at the Closing shall be equal to an aggregate amount of Two Hundred and Forty Two Million Eight Hundred Thousand Dollars ($242,800,000) (such amount, the "Purchase Price"). -------------- Section 2.3 Payment of Purchase Price. Sub shall pay the Purchase Price ------------------------- by wire transfer in immediately available funds to such account or accounts as PTK shall designate in writing to Sub not less than three (3) business days prior to the Closing Date. -4- Section 2.4 Closing. The purchase and sale of the Stock (the "Closing") ------- ------- shall take place at 10:00 A.M. at the offices of White & Case LLP, 1155 Avenue of the Americas, New York, New York 10036 as soon as practicable, but in any event upon the occurrence of the later of (i) three (3) business days after the last of the conditions set forth in Articles VI and VII hereof is satisfied or waived and (ii) the date of termination by Parent of the Merger Agreement pursuant to Section 8.1 (d) thereof, or at such other time and date as the parties hereto shall agree in writing. Such date is herein referred to as the "Closing Date". - ------------- ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLERS ---------------------------------------------- Section 3. Representations and Warranties of the Sellers. Each of the --------------------------------------------- Sellers hereby jointly and severally represents and warrants to Parent and Sub as follows: Section 3.1 Due Organization, Good Standing and Corporate Power. Each of --------------------------------------------------- the Sellers is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. Each of the Company and its subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and each of the Company and its subsidiaries has the corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each of the Company and its subsidiaries is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except in such jurisdictions where the failure to be so qualified or licensed and in good standing would not have a material adverse effect on the Condition of the Company and its subsidiaries taken as a whole. The Company has made available to Parent complete and correct copies of the certificates of incorporation and by-laws or other organizational documents of each of the Company and its subsidiaries, in each case as amended to the date of this Agreement. Except as set forth on Schedule 3.1 of the Disclosure Letter, the respective certificates of incorporation and by-laws or other organizational documents of each of the Company and its subsidiaries do not contain any provision limiting or otherwise restricting the ability of such Person to control its subsidiaries. Section 3.2 Authorization and Validity of Agreement. Each of the Sellers --------------------------------------- has the necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by each of the Sellers, and the consummation by it of the transactions contemplated hereby, have been duly authorized and approved by its Board of Directors and no other corporate or stockholder action on the part of either Seller is necessary to authorize the execution, delivery and performance of this Agreement by such Seller and the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by each of the Sellers and is a valid and binding obligation of such Seller enforceable against such Seller in accordance with its terms, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affect- -5- ing the enforcement of creditors' rights generally and by general equitable principles (whether considered in a proceeding at law or in equity). Section 3.3 Capitalization. Schedule 3.3(a) of the Disclosure Letter sets -------------- forth (i) the authorized, issued and outstanding capital stock of each of the Company and its subsidiaries and (ii) the owners of the issued and outstanding shares of capital stock of each of the Company and its subsidiaries. All issued and outstanding capital stock of each of the Company and its subsidiaries has been duly authorized and validly issued and is fully paid and nonassessable, and is not subject to, nor was issued in violation of, any preemptive rights. Except as set forth on Schedule 3.3(b) of the Disclosure Letter, no shares of capital stock of either the Company or any of its subsidiaries are authorized, issued or outstanding and there are no outstanding or authorized options, warrants, rights, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities, or other commitments, contingent or otherwise, relating to capital stock of the Company or any of its subsidiaries, pursuant to which the Company or any of its subsidiaries is or may become obligated to issue shares of its capital stock or any securities convertible into, exchangeable for, or evidencing the right to subscribe for, any shares of the capital stock of the Company or any of its subsidiaries. Neither the Company nor any of its subsidiaries has authorized or outstanding bonds, debentures, notes or other indebtedness the holders of which have the right to vote (or convertible or exchangeable into or exercisable for securities having the right to vote) with the stockholders of such Person on any matter. Except as set forth on Schedule 3.3(c) of the Disclosure Letter, neither the Company nor any of its subsidiaries owns, directly or indirectly, any capital stock or other equity, ownership or proprietary interest in any Person. Except as set forth on Schedule 3.3(d) of the Disclosure Letter, all of the outstanding shares of capital stock of each of the subsidiaries of the Company are owned, of record and beneficially, by the Company or its subsidiaries free and clear of any Liens. Except as set forth on Schedule 3.3(e) of the Disclosure Letter, there are no restrictions of any kind which prevent or restrict the payment of dividends by the Company or any of its subsidiaries. Section 3.4 Consents and Approvals; No Violations. Other than in ------------------------------------- connection with or in compliance with the provisions of (i) the HSR Act and other Antitrust Laws, (ii) the Securities Act, (iii) the Exchange Act, (iv) the "blue sky" laws of various states, and (v) applicable alcohol beverage control and licensing laws and drug and pharmacy laws and regulations ("Alcohol and Drug Laws") and except as disclosed in Schedule 3.4 of the Disclosure Letter, the execution and delivery of this Agreement by the Sellers and the consummation by the Sellers of the transactions contemplated hereby will not: (1) violate any provision of the certificate of incorporation or by-laws (or other organizational document) of the Sellers or the Company or any of its subsidiaries; (2) violate any statute, ordinance, rule, regulation, order or decree of any court or of any governmental or regulatory body, agency or authority applicable to the Sellers or the Company or any of its subsidiaries or by which any of their respective properties or assets may be bound; (3) require the Sellers or the Company or any of its subsidiaries to make or obtain any filing with or permit, consent or approval or give any notice to, any governmental or regulatory body, agency or authority; or (4) result in a violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, payment or acceleration) under, or result in the creation of any Lien upon any of the properties or assets of the Sellers or the Company or any of its subsidiaries under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, franchise, permit, agreement, lease, -6- franchise agreement, collective bargaining agreement or other agreement, instrument or obligation to which the Sellers or the Company or any of its subsidiaries is a party, or by which it or any of their respective properties or assets is bound, except for such filings, permits, consents or approvals the absence of which would not, or violations which would not, have a material adverse effect on the Condition of the Company and its subsidiaries, taken as a whole, or which could not reasonably be expected to prevent or materially delay consummation of the transactions contemplated by this Agreement. Section 3.5 Public Reports. (a) Since January 1, 1996 (the "Public -------------- ------ Disclosure Date"), the Company has filed all forms, reports, registration - --------------- statements and other filings with the Securities and Exchange Commission (the "Commission") required to be filed by it pursuant to the federal securities laws - ----------- and the Commission rules and regulations thereunder (such forms, reports, registration statements and other filings, together with any amendments thereto, are collectively referred to as the "Public Reports"), and the Public Reports -------------- filed with the Commission have complied in all material respects with all applicable requirements of the federal securities laws and the Commission rules and regulations thereunder. (b) As of their respective dates, the Public Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. Each of the audited consolidated balance sheets and the unaudited consolidated balance sheets (including any related notes and schedules) included in the Public Reports fairly present, in all material respects, the consolidated financial position of the Company and its subsidiaries as of its date, and each of the consolidated statements of operations, shareholders' deficiency and cash flows included in the Public Reports (including any related notes and schedules) fairly present, in all material respects, the consolidated results of operation, cash flows and changes in financial position of the Company and its subsidiaries for the period set forth therein (subject, where appropriate, to notes and normal year-end audit adjustments), in accordance with GAAP consistently applied throughout the periods indicated (except as may be indicated therein or in the notes or schedules thereto). Section 3.6 Other Financial Statements. (a) The Sellers have heretofore -------------------------- furnished Parent with the unaudited consolidated balance sheets of the Company and its subsidiaries as at October 31, 1998 and the related consolidated statements of operations, shareholders' deficiency and cash flows for the nine month period then ended. The consolidated balance sheet of the Company and its subsidiaries as at January 30, 1998 contained in the Public Reports is hereinafter referred to as the "Balance Sheet" and January 30, 1998 as the ------------- "Balance Sheet Date" and the unaudited consolidated balance sheet of the Company - ------------------- and its subsidiaries as at October 31, 1998 is hereinafter referred to as the "October Balance Sheet". The October Balance Sheet, including the footnotes - ---------------------- thereto, except as indicated therein, has been prepared in accordance with GAAP consistently applied throughout the nine month period indicated. Subject to normal year end adjustments, the October Balance Sheet fairly presents, in all material respects, the consolidated financial position of the Company and its subsidiaries as at the date thereof and reflects all material claims and all material debts and liabilities of the Company and its subsidiaries, fixed or contingent, as at the date thereof and the related consolidated statements of operations, shareholder's deficiency and cash flows fairly present, in all material aspects, the results of operations -7- and cash flows of the Company and its subsidiaries and the changes in financial position for the nine month period indicated. (b) The consolidated financial statements of the Company and its subsidiaries delivered to Parent pursuant to Section 5.6(b)(i) will fairly present, in all material respects, the consolidated financial condition of the Company and its subsidiaries at the date thereof and will reflect all material claims against and all material debts and liabilities of the Company and its subsidiaries, fixed or contingent, as at the date thereof, and the related consolidated statements of operations, shareholders' deficiency and cash flows will fairly present, in all material respects, the results of operations and cash flows of the Company and its subsidiaries and the changes in financial position for the period indicated. Section 3.7 Absence of Certain Changes. Except as previously disclosed in -------------------------- the Public Reports or in Schedule 3.7 of the Disclosure Letter or as otherwise contemplated by this Agreement, since the Balance Sheet Date and up to and including the date hereof (i) there has not been any material adverse change in the Condition of the Company and its subsidiaries taken as a whole; (ii) the businesses of the Company and each of its subsidiaries have been conducted only in the ordinary course; (iii) neither the Company nor any of its subsidiaries has incurred any material liabilities (direct, contingent or otherwise) or engaged in any material transaction or entered into any material agreement other than in the ordinary course of business; (iv) neither the Company nor any of its subsidiaries has increased the compensation of any officer or granted any general salary or benefits increase to any of their employees other than in the ordinary course of business or pursuant to collective bargaining agreements; (v) there has been no declaration, setting aside or payment of any dividend or other distribution with respect to the capital stock of the Company or any of its subsidiaries; and (vi) there has been no change by the Company or any of its subsidiaries in accounting principles, practices or methods. Section 3.8 Compliance with Laws. Except as disclosed in the Public -------------------- Reports filed on or prior to the date hereof, the Company and each of its subsidiaries is in compliance with all applicable laws, regulations, orders, judgments and decrees except where the failure to so comply would not, individually or in the aggregate, have a material adverse effect on the Condition of the Company and its subsidiaries taken as a whole or could reasonably likely prevent or materially delay consummation of the transactions contemplated by this Agreement. Section 3.9 Employee Benefit Plan Triggering Events. Except as set forth --------------------------------------- on Schedule 3.9 of the Disclosure Letter, the execution of this Agreement and the consummation of the transactions contemplated hereby do not constitute a triggering event under any Employee Benefit Plan, policy, arrangement, statement, commitment or agreement, whether or not legally enforceable, which will or may result in any payment, acceleration, vesting or increase in benefits to any employee or former employee, officer or director of the Company or any of its subsidiaries. "Employee Benefit Plan" shall mean any domestic or foreign (i) "employee --------------------- benefit plan," within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations thereunder ("ERISA"); (ii) bonus, stock option, stock purchase, restricted stock, incentive, profit-sharing, pension or retirement, deferred compensation, -8- medical, life, disability, accident, or welfare plans, programs, arrangements, commitments or practices (whether or not insured); and (iii) employment, consulting, termination and severance contracts or agreements for active, retired or former employees or directors, whether or not any such plans, programs, arrangements, commitments, contracts, agreements or practices referred to in (i), (ii) or (iii) are in writing or are otherwise exempt from the provisions of ERISA, established, maintained or contributed to (or with respect to which an obligation to contribute has been undertaken) or with respect to which any potential liability is borne by the Company or any of its subsidiaries (including, for the purposes of this Section 3.9, all employers (whether or not incorporated) that are by reason of common control treated together with the Company or any of is subsidiaries as a single employer within the meaning of Section 414 of the Code. Section 3.10 Liabilities. Except (i) as set forth in the Balance Sheet or ----------- referred to in the footnotes thereto, (ii) as set forth in the October Balance Sheet or referred to in the footnotes thereto, (iii) as set forth in the Public Reports, (iv) as disclosed in Schedule 3.10 of the Disclosure Letter, or (v) as otherwise contemplated by this Agreement, since the Balance Sheet Date and up to and including the date hereof, neither the Company nor any of its subsidiaries has incurred any material outstanding claims, liabilities or indebtedness (other than trade payables incurred in the ordinary course of business), contingent or otherwise, that would be required to be disclosed in the Company's consolidated financial statements prepared in accordance with GAAP consistently applied, other than (x) liabilities incurred subsequent to the Balance Sheet Date in the ordinary course of business not involving borrowings by the Company or any of its subsidiaries and (y) indebtedness incurred since the Balance Sheet Date pursuant to the Company's working capital facility (the "Working Capital --------------- Facility") as in effect as of the date hereof pursuant to the Credit Agreement - -------- among the Company, various banks, and The Chase Manhattan Bank, as Agent, dated as of June 30, 1997, as amended and restated (the "Credit Agreement"). ---------------- Section 3.11 Broker's or Finder's Fee. Except as set forth on Schedule ------------------------ 3.11 of the Disclosure Letter, no agent, broker, Person or firm acting on behalf of the Sellers, the Company or any of their respective subsidiaries is, or will be, entitled to any fee, commission or broker's or finder's fees from any of the parties hereto, or from any Person controlling, controlled by, or under common control with any of the parties hereto, in connection with this Agreement or any of the transactions contemplated hereby. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB ------------------------------------------------ Section 4. Each of Parent and Sub hereby represents and warrants, jointly and severally, to the Sellers as follows: Section 4.1 Due Organization; Good Standing and Corporate Power. Parent is --------------------------------------------------- a public company with limited liability duly organized and validly existing under the laws of the Netherlands. Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. -9- Section 4.2 Authorization and Validity of Agreement. Each of Parent and --------------------------------------- Sub has full corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by each of Parent and Sub, and the consummation by each of them of the transactions contemplated hereby, have been duly authorized by each of the Executive and Supervisory Boards of Parent and the Board of Directors of Sub. No other corporate action on the part of either of Parent or Sub is necessary to authorize the execution, delivery and performance of this Agreement by each of Parent and Sub and the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by each of Parent and Sub and is a valid and binding obligation of each of Parent and Sub, enforceable against each of Parent and Sub in accordance with its terms, except that such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally, and general equitable principles (whether considered in a proceeding at law or in equity). Section 4.3 Consents and Approvals; No Violations. Other than in ------------------------------------- connection with or in compliance with the provisions of (i) the HSR Act and other Antitrust Laws, (ii) the Securities Act, (iii) the Exchange Act, (iv) the "blue sky" laws of various states, and (v) applicable Alcohol and Drug Laws, the execution and delivery of this Agreement by Parent and Sub and the consummation by Parent and Sub of the transactions contemplated hereby will not: (1) violate any provision of the certificate of incorporation or by-laws of Parent or Sub; (b) violate any statute, ordinance, rule, regulation, order or decree of any court or of any governmental or regulatory body, agency or authority applicable to Parent or Sub or by which its properties or assets may be bound; (c) require Parent or Sub to make or obtain any filing with, or permit, consent or approval of, or give any notice to, any governmental or regulatory body, agency or authority; or (d) result in a violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, payment or acceleration) under, or result in the creation of any Lien upon any of the properties or assets of Parent or Sub under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, franchise, permit, agreement, lease, franchise agreement or other instrument or obligation to which Parent or Sub is a party or by which Parent or Sub or its properties or assets is bound, except for such filings, permits, consents or approvals the absence of which could not reasonably be expected to prevent or materially delay consummation of the transactions contemplated by this Agreement. Section 4.4 Broker's or Finder's Fee. No agent, broker, Person or firm ------------------------ acting on behalf of Parent or Sub is, or will be, entitled to any commission or broker's or finder's fees from any of the parties hereto, or from any Person controlling, controlled by, or under common control with any of the parties hereto, in connection with this Agreement or any of the transactions contemplated hereby. Section 4.5 Financing. Parent will provide, or cause to be provided to --------- Sub, the funds necessary to consummate the purchase and sale of the Stock in accordance with the terms hereof. -10- ARTICLE V COVENANTS --------- Section 5.1 Access to Information Concerning Properties and Records. ------------------------------------------------------- During the period commencing on the date hereof and ending on the Closing Date, the Sellers shall, and shall cause the Company and each of its subsidiaries to, upon reasonable notice, afford Parent, Sub and good faith potential purchasers of stores in connection with the obligations of the parties hereto pursuant to Section 5.7(b), and their respective counsel, accountants, consultants and other authorized representatives, reasonable access during normal business hours to the employees, properties, books and records of the Company and each of its subsidiaries in order that they may have the opportunity to make such reasonable investigations as they shall desire of the affairs of the Company and each of its subsidiaries and other information concerning the business, properties and personnel of the Company and each of its subsidiaries as Parent and Sub may reasonably request, provided that Parent and Sub shall not have the right to -------- ---- conduct tests of the surface or subsurface soil and water beneath or about the real property owned or used by the Company or any of its subsidiaries. The Sellers shall, and shall cause the Company and each of its subsidiaries to, cause its officers and employees to furnish such additional financial and operating data and other information, and respond to such inquiries, as Parent and Sub shall from time to time reasonably request. Notwithstanding anything in this Section 5.1 to the contrary, neither the Company nor any of its subsidiaries shall be required to provide such access to or otherwise disclose such books, records or other information concerning their respective businesses to Parent or Sub as would violate Antitrust Laws. Section 5.2 Confidentiality. Each of Parent and Sub will hold and will --------------- cause its officers, employees, auditors and other agents, representatives and advisors to hold in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all documents and information concerning the Company or any of its subsidiaries furnished to Parent or Sub in connection with the transactions contemplated by this Agreement (except to the extent that such information can be shown to have been (i) previously known by Parent or Sub from sources other than the Company or any of its subsidiaries, or its directors, officers, auditors or other agents, representatives and advisors (ii) in the public domain through no fault of Parent or Sub or (iii) later lawfully acquired by Parent or Sub on a non- confidential basis from other sources who are not known by Parent or Sub to be bound by a confidentiality agreement or otherwise prohibited from transmitting the information to Parent or Sub by a contractual, legal or fiduciary obligation) and will not release or disclose such information to any other Person, except its auditors and other agents, representatives and advisors in connection with this Agreement who need to know such information. If the transactions contemplated by this Agreement are not consummated, such confidence shall be maintained for a period of two years from the date hereof and, if requested by or on behalf of Parent and Sub shall, and shall use all reasonable efforts to cause their auditors and other agents, representatives and advisors to, return to the Sellers or destroy all copies of written information furnished by the Sellers or the Company or any of its subsidiaries or their respective advisors to Parent and Sub or their auditors and other agents, representatives and advisors. It is understood that Parent and Sub shall be deemed to have satisfied their obligation to hold such information confidential if they exercise the same care as they take to preserve confidentiality for their own similar information. -11- Section 5.3 Conduct of the Business of the Company and its Subsidiaries. ----------------------------------------------------------- Except as contemplated by this Agreement, during the period from the date of this Agreement until the Closing, the Sellers shall cause the Company and each of its subsidiaries to conduct its operations in the ordinary course of business, consistent with past practice and to use its best efforts to (v) preserve intact its business organization, (w) maintain its material rights and franchises, (x) keep available the services of its officers and employees, (y) maintain satisfactory relationships with suppliers, distributors, customers and others having business relationships with it and (z) to take measures to reduce to zero any excess loss account (as determined in accordance with Treasury Regulations Sections 1.1502-14, 1.1502-19 and 1.1502-32) reflected on the books and records of the Company and its subsidiaries or as subsequently determined by the Company. Without limiting the generality of and in addition to the foregoing, except as set forth on Schedule 5.3 of the Disclosure Letter and except as otherwise contemplated by this Agreement, prior to the time specified in the preceding sentence, the Sellers shall cause the Company and each of its subsidiaries not to, without prior written consent of Parent: (a) amend its certificate of incorporation or by-laws or other organizational documents in any way; (b) authorize for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise) any stock of any class or any other securities; (c) split, combine or reclassify any shares of its capital stock, declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock or redeem or otherwise acquire any of its securities; (d) (i) pledge or otherwise encumber shares of its capital stock; (ii) except in the ordinary course of business consistent with past practices (x) incur, assume or prepay any obligations with respect to any long-term debt, letters of credit or short-term debt, other than indebtedness (A) incurred, assumed or prepaid under the Working Capital Facility, (B) that is mandatorily prepayable in accordance with its terms and (C) that is intercompany indebtedness by and among any of the Company and any of its subsidiaries (other than Pathmark Risk Management Corporation); (y) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for any material obligations of any other Person except any of its wholly-owned subsidiaries; or (z) make any material loans, advances or capital contributions to, or investments in, any other Person; or (iii) mortgage or pledge any of its assets or create or permit to exist any material lien thereupon that secures indebtedness for borrowed money; (e) except as required by law or existing written agreements, enter into, adopt or materially amend any bonus, profit sharing, compensation, severance, termination, stock option, stock appreciation right, restricted stock, performance unit, pension, retirement, deferred compensation, employment, severance or other employee benefit agreements, trusts, plans, funds or other arrangements of or for the benefit or welfare of any employee of the Company and its subsidiaries, or (except for normal increases in the ordinary course of business that are consistent with past practices) increase in any manner the compensation or fringe benefits of any such employee or pay any benefit not required by any existing plan and arrangement (including, without limitation, the -12- granting of stock options, stock appreciation rights, shares of restricted stock or performance units) or enter into any contract, agreement, commitment or arrangement to do any of the foregoing; (f) transfer, sell, lease, license or dispose of any lines of business, subsidiaries, divisions, operating units or facilities outside the ordinary course of business or enter into any material commitment or transaction outside the ordinary course of business other than any such transactions between or among any of the Company and its subsidiaries (other than Pathmark Risk Management Corporation); (g) other than any such transactions between or among any of the Company and its subsidiaries (other than Pathmark Risk Management Corporation, except with respect to any transaction intended to comply with Section 5.3(z)), acquire or agree to acquire, by merging or consolidating with, by purchasing an equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets of any other Person (other than the purchase of assets in the ordinary course of business and consistent with past practice), in each case where such action would be material to the Condition of the Company and its subsidiaries taken as a whole; (h) except as may be required by law or existing written contractual or collective bargaining agreements or in connection with the termination of any employee, take any action to terminate or materially amend, in a manner adverse to the Company or any of its subsidiaries, any of its pension plans or retiree medical plans with respect to or for the benefit of any employee of the Company or any of its subsidiaries; (i) materially modify, amend or terminate any significant contract to which it is a party or waive any of its material rights or claims except in the ordinary course of business consistent with past practice; (j) effect any material change in any of its methods of accounting, except as may be required by law or generally accepted accounting principles; (k) (i) take any action, engage in any transaction or enter into any agreement which would cause any of the representations or warranties set forth in Article III that are subject to, or qualified by, a "material adverse effect", "material adverse change" or other materiality qualification to be untrue as of the Closing, or any such representations and warranties that are not so qualified to be untrue in any respect which would otherwise have a material adverse effect on the Condition of the Company and its subsidiaries taken as a whole or (ii) purchase or acquire, or offer to purchase or acquire, any shares of capital stock of the Company; (l) take any action including: without limitation, the adoption of any shareholder rights plan or amendments to the Certificate of Incorporation, which would, directly or indirectly, restrict or impair the ability of Sub to vote, or otherwise to exercise the rights and receive the benefits of a stockholder with respect to, securities of the Company that may be acquired or -13- controlled by Sub or permit any stockholder to acquire securities of the Company on a basis not available to Sub in the event that Sub were to acquire any shares of Stock; and (m) enter into a legally binding commitment with respect to, or any agreement to take, any of the foregoing actions. Notwithstanding anything else contained in this Section 5.3 to the contrary, the following shall be permitted: (1) the acquisition of direct or indirect interests in real property intended for the operation of stores of the Company or any of its subsidiaries (other than Pathmark Risk Management Corporation), the improvement of real property, the remodeling of stores of the Company or any of its subsidiaries (other than Pathmark Risk Management Corporation) and the obtaining of financing therefor in the ordinary course of business consistent with past practice, (2) the negotiation and entering into by the Company or any of its subsidiaries (other than Pathmark Risk Management Corporation) of amendments to existing leases for real property in the ordinary course of business, (3) the negotiation in good faith and entering into new collective bargaining agreements by the Company that replace agreements that have expired or will expire pursuant to their terms within 90 days from the date of the commencement of negotiations, (4) the marketing and sale of certain real estate not used in the supermarket business by the Company or any of its subsidiaries (other than Pathmark Risk Management Corporation) as set forth on Schedule 5.3 of the Disclosure Letter, provided that no such sale (other than a -------- ---- sale pursuant to a binding agreement that the Company is a party to on the date hereof) shall be agreed to without prior adequate consultation with Parent, (5) entering into amendments to the Credit Agreement to modify covenants as required (other than modifications, except for a possible increase in the interest rate, which will make any one or more covenants more restrictive), (6) entering into an agreement implementing the amendments to the Supply Agreement agreed to in a memorandum of understanding effective December 27, 1998 by and between the Company and C&S Wholesale Grocers, Inc. and (7) the Company may distribute that certain indebtedness of PTK owed to the Company evidenced by a promissory note dated May 12, 1998 in the face amount of $53,302,328.52 as a dividend to PTK. Section 5.4 Best Efforts. Subject to the terms and conditions provided ------------ herein, each of the Sellers, Parent and Sub shall, and the Sellers shall cause the Company and each of its subsidiaries to, cooperate and use their respective best efforts to take, or cause to be taken, all appropriate action, and to make, or cause to be made, all filings necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including, without limitation, their respective best efforts to obtain, prior to the Closing Date, all licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts with the Sellers, the Company or any of their respective subsidiaries as are necessary for consummation of the transactions contemplated by this Agreement; provided, however, that no loan -------- ------- ---- agreement or contract for borrowed money shall be repaid except as currently required by its terms, in whole or in part, and no material contract shall be amended to increase the amount payable thereunder or otherwise to be materially more burdensome to the Company or any of its subsidiaries in order to obtain any such consent, approval or authorization without first obtaining the written approval of Parent. -14- Section 5.5 No Solicitation of Other Offers. (a) The Sellers shall not, ------------------------------- and the Sellers shall cause the Company and each of its subsidiaries not to, directly or indirectly, take (or authorize or permit their respective officers, directors, employees, representatives, consultants, investment bankers, attorneys, accountants or other agents or Affiliates, to so take) any action to (i) solicit, initiate or encourage the submission of any Acquisition Proposal, (ii) enter into an agreement of merger or other business combination or an agreement for the sale or other disposition by the Company or any of its subsidiaries of a material amount of assets or a sale of shares of capital stock whether by merger or other business combination or tender or exchange offer or (iii) participate in any way in discussions or negotiations with, or furnish any information to, any Person (other than Parent or Sub) 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. "Acquisition Proposal" shall mean any proposed merger or other business -------------------- combination, sale or other disposition of any material amount of assets, sale of shares of capital stock, tender offer or exchange offer or similar transactions involving the Company or any of its subsidiaries. (b) The Board of Directors of each of the Sellers and the Company shall not take any action to withdraw or modify in a manner adverse to Parent or Sub, or take a position inconsistent with, its approvals or recommendation of this Agreement or to recommend another Acquisition Proposal and shall not resolve to do any of the foregoing. (c) In addition to the obligations of the Sellers set forth in paragraph (a), the Sellers shall, and the Sellers shall cause the Company and each of its subsidiaries to, promptly advise Parent of any request for information or of any Acquisition Proposal, or any proposal with respect to any Acquisition Proposal, the material terms and conditions of such Acquisition Proposal, and the identity of the Person making any such Acquisition Proposal or inquiry. (d) Immediately following the execution of this Agreement, the Sellers shall, and shall cause the Company and each of its subsidiaries and each of their respective officers, directors, employees, representatives, consultants, investment bankers, attorneys, accountants or other agents or Affiliates to, cease any existing discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal and request each Person which has heretofore executed a confidentiality agreement in connection with its consideration of acquiring the Company or any of its subsidiaries or any portion thereof to return all confidential information heretofore furnished to such Person by or on behalf of the Company or any of its subsidiaries. Section 5.6 Notification of Certain Matters. (a) The Sellers shall give ------------------------------- prompt notice to Parent of any notice of, or other communication relating to, a material default or event that, with notice or lapse of time or both, would become a material default, received by the Sellers subsequent to the date of this Agreement and prior to the Closing, under any material contract to which the Company or any of its subsidiaries is a party or is subject. The Sellers and Parent shall give prompt notice to each other of (i) any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by this Agreement and (ii) the occurrence or non-occurrence of any events the occurrence or non-occurrence of which would cause either (w) a representation or warranty con- -15- tained in this Agreement, in any Schedule to the Disclosure Letter or in any certificate delivered pursuant to this Agreement and not qualified by any materiality standard, to be untrue or inaccurate in any material respect, (x) any other representation or warranty contained in this Agreement, in any schedule to the Disclosure Letter or in any certificate delivered pursuant to this Agreement, to be untrue or inaccurate in any respect, (y) any of the conditions set forth in Article VI or VII to be unsatisfied in any material respect at the Closing; provided that the parties hereto need not give notice -------- ---- with respect to events that are reported in the financial or general interest newspapers that do not specifically relate to the Sellers, the Company or any of its subsidiaries or Parent or their respective businesses or (z) any failure to comply with or satisfy any covenants, condition or agreement to be complied with or satisfied by it hereunder. (b) The Sellers shall provide Parent with (i) the audited consolidated balance sheet of the Company and its subsidiaries as of January 30, 1999 and the related statements of operations, shareholder's deficiency and cash flows for the fiscal year then ended, all as certified by the Company's independent accountants, within three (3) business days after preparation and certification thereof, (ii) the unaudited consolidated balance sheet of the Company and its subsidiaries, and the related consolidated statements of operations, shareholders' deficiency and cash flows of the Company and its consolidated subsidiaries, for each fiscal quarter ending prior to the Closing, within forty- five days after the end of each such fiscal quarter and (iii) the unaudited statement of operations of the Company for each fiscal month ending prior to the Closing, within thirty days after the end of each such fiscal month. In addition, subject to compliance with the Antitrust Laws, the Sellers shall cause the Company to deliver to Parent on a weekly basis its internal sales overview reports promptly as they are prepared by the Company for each such week. Section 5.7 Antitrust Filings. (a) Parent, Sub and the Sellers shall (i) ----------------- take promptly all actions necessary to make the filings required of Parent, Sub or any of their Affiliates under the applicable Antitrust Laws (as such term is defined in Section 5.7(d)), (ii) comply at the earliest practicable date with any request for additional information or documentary material received by Parent, the Sellers or any of their respective Affiliates from the Federal Trade Commission or the Antitrust Division of the Department of Justice pursuant to the HSR Act and (iii) cooperate in connection with any filing under applicable Antitrust Laws and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by this Agreement commenced by any of the Federal Trade Commission, the Antitrust Division of the Department of Justice or state attorneys general. (b) Each of the Sellers, Parent and Sub shall use all best efforts to resolve such objections, if any, as may be asserted with respect to any transaction contemplated by this Agreement under any Antitrust Law. If any administrative, judicial or legislative action or proceeding is instituted (or threatened to be instituted) challenging any transaction contemplated by this Agreement as violative of any Antitrust Law, the Company, Parent and Sub shall cooperate to contest and resist any such action or proceeding, and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order (whether temporary, preliminary or permanent) that is in effect and that restricts, prevents or prohibits consummation of the any transaction contemplated by this Agreement, including, without limitation, by pursuing all reasonable avenues of administrative and judicial appeal. -16- (c) Each of the Sellers, Parent and Sub shall promptly inform each other of any material communication made to, or received by such party from, the Federal Trade Commission, the Antitrust Division of the Department of Justice or any other governmental or regulatory authority regarding any of the transactions contemplated hereby. (d) "Antitrust Law" means the Sherman Act, as amended, the Clayton Act, as ------------- amended, the HSR Act, the Federal Trade Commission Act, as amended, and all other federal and state statutes, rules, regulations, orders, decrees, administrative and judicial doctrines, and other laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade. Section 5.8 Transfer Taxes. The Sellers and Parent shall cooperate in the -------------- preparation, execution and filing of all returns, questionnaires, applications or other documents regarding any real property transfer or gains, sales, use, transfer, value added, stock transfer and stamp taxes, any transfer, recording, registration and other fees and any similar taxes which become payable in connection with the transactions contemplated by this Agreement (together with any related interest, penalties or additions to tax, "Transfer Taxes"). All -------------- Transfer Taxes shall be paid by the Company and expressly shall not be a liability of the Sellers. Section 5.9 Employee Benefits. During the period commencing at the ----------------- Closing and ending on the first anniversary thereof, Parent shall cause the current and former employees of the Company and its subsidiaries who are on the Closing Date entitled to receive compensation or any benefits from Pathmark or any of its subsidiaries to be provided with compensation and employee benefit plans (other than stock option or other plans involving the potential issuance of securities of the Company, Parent or any of their respective subsidiaries, and incentive compensation or similar programs) which in the aggregate are not materially less favorable than those currently provided to such employees by the Company and its subsidiaries, to the extent permitted under laws and regulations in force from time to time, provided that employees covered by collective -------- ---- bargaining agreements need not be provided with such benefits, and provided, -------- further, that Parent reserves the right to review all employee benefits after - ------- ---- the Closing and to make such changes as it deems appropriate. Section 5.10 Directors' and Officers' Insurance; Indemnification. (a) The --------------------------------------------------- certificate of incorporation and the by-laws of the Company shall contain the provisions with respect to indemnification and exculpation from liability set forth in the Company's certificate of incorporation and by-laws on the date of this Agreement, which provisions shall not be amended, repealed or otherwise modified for a period of six years from the Closing in any manner that would adversely affect the rights thereunder of individuals who on or prior to the Closing were directors, officers, employees or agents of the Company, unless such modification is required by law. Parent agrees that all rights of indemnification now existing in favor of any director, officer, employee, or agent of the subsidiaries of the Company as provided in their respective charters or by-laws on the date of this Agreement shall survive the Merger and shall continue in full force and effect for a period of six years from the Effective Time (b) The Company shall for the six year period commencing at the Closing either (x) maintain in effect the Company's current directors' and officers' liability insurance covering those -17- Persons who are currently covered on the date of this Agreement by the Company's directors' and officers' liability insurance policy (a copy of which has been heretofore delivered to Parent) (the "Indemnified Parties"); provided, however, ------------------- -------- ------- that in no event shall Parent be required to expend in any one year an amount in excess of 150% of the annual premiums currently paid by the Company for such insurance which the Company represents to be $323,000; provided further, that if ---------------- ---- the annual premiums of such insurance coverage exceed such amount, the Company shall be obligated to obtain a policy with the greatest coverage available for a cost not exceeding such amount; provided further, that the Company may ---------------- ---- substitute for the Company policies, policies with at least the same coverage containing terms and conditions which are no less advantageous and provided that said substitution does not result in any gaps or lapses in coverage with respect to matters occurring prior to the Closing or (y) cause the Parent's directors' and officers' liability insurance then in effect to cover those Persons who are covered on the date of this Agreement by the Company's directors' and officers' liability insurance policy with respect to those matters covered by the Company's directors' and officers' liability policy. (c) Parent agrees to indemnify, and to cause the Company to indemnify, all Indemnified Parties to the fullest extent permitted by applicable law with respect to all acts and omissions arising out of such individuals' services as officers, directors, employees or agents of the Company or any of its subsidiaries or as trustees or fiduciaries of any plan for the benefit of employees of the Company or any of its subsidiaries, occurring prior to the Closing including, without limitation, the transactions contemplated by this Agreement. Without limitation of the foregoing, in the event any such Indemnified Party is or becomes involved in any capacity in any action, proceeding or investigation in connection with any matter, including without limitation, the transactions contemplated by this Agreement, occurring prior to, and including, the Closing, Parent, from and after the Closing, will pay as incurred such Indemnified Party's reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith. Subject to Section 5.11(d) below, Parent shall pay all reasonable expenses, including attorneys' fees, that may be incurred by any Indemnified Party in enforcing this Section 5.11 or any action involving an Indemnified Party resulting from the transactions contemplated by this Agreement. If the indemnity provided for in this Section 5.11 is not available with respect to any Indemnified Party, then the Company and the Indemnified Party shall contribute to the amount payable in such proportion as is appropriate to reflect relative faults and benefits. (d) Any Indemnified Party wishing to claim indemnification under paragraph (a) or (c) of this Section 5.11, upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify Parent thereof. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Closing), (i) Parent or the Company shall have the right, from and after the Closing, to assume the defense thereof (with counsel engaged by Parent or the Company to be reasonably acceptable to the relevant Indemnified Party) and Parent shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof, (ii) such Indemnified Party will cooperate in the defense of any such matter and (iii) Parent or the Company shall not be liable for any settlement effected without its prior written consent; and provided further that Parent shall not have any obligation hereunder to any Indemnified Party when and if a court of competent jurisdiction shall ultimately determine, and such determination -18- shall have become final, that the indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable law. ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF SUB ------------------------------------------ Section 6. Conditions Precedent to Obligations of Parent and Sub. The ----------------------------------------------------- respective obligations of Parent and Sub to purchase the Stock is subject to the satisfaction or waiver (subject to applicable law) at or prior to the Closing of each of the following conditions: Section 6.1 Truth of Representations and Warranties. Each representation --------------------------------------- or warranty of the Sellers contained in this Agreement that is subject to, or qualified by, "material adverse effect", "material adverse change" or other materiality qualification shall be true and correct, in each case as if such representation or warranty was made at the Closing, any representation or warranty that is not so qualified shall be true and correct in any respect which would otherwise have a material adverse effect on the Condition of the Company and its subsidiaries taken as a whole, in each case as if such representation or warranty was made at the Closing except as to any such representation or warranty which speaks as of a specific date or for a specific period, which must be true and correct in the foregoing respects as of such specific date or period, and Parent shall have received a certificate signed by an executive officer of the Company, dated the Closing Date, to such effect. Section 6.2 Performance of Agreements. Each of the Sellers shall have ------------------------- performed in all material respects all obligations and complied in all material respects with all agreements and covenants to be performed or complied with by it under this Agreement and, in the case only of failures to perform any agreement or covenant of the Sellers pursuant to Section 5.3 (other than clause (c) thereof), such failure to perform did or would not have a material adverse effect on the Condition of the Company and its subsidiaries taken as a whole or materially adversely effect the ability of Parent or Sub to consummate the transactions contemplated by this Agreement or have a material adverse effect on the value of the Company and its subsidiaries taken as a whole and Parent shall have received a certificate signed by an executive officer of the Company, dated the Closing Date, to such effect. Section 6.3 HSR Act. Any waiting period (and any extension thereof) under ------- the HSR Act applicable to the transactions contemplated by this Agreement shall have expired or been terminated. Section 6.4 Injunction. No preliminary or permanent injunction or other ---------- order shall have been issued by any court or by any governmental or regulatory agency, body or authority which prohibits, restrains, enjoins or restricts the consummation of the transactions contemplated by this Agreement and which is in effect at the Closing, provided that, in the case of a decree, injunction or -------- ---- other order, each of the parties shall have used all reasonable efforts to prevent the entry of any such injunction or other order and to appeal as promptly as possible any decree, injunction or other order that may be entered. -19- Section 6.5 Statutes. No statute, rule, regulation, executive order, -------- decree or order of any kind shall have been enacted, entered, promulgated or enforced by any court or governmental authority which prohibits, restrains, enjoins or restricts the consummation of the transactions contemplated by this Agreement or has the effect of making any of the transactions contemplated by this Agreement illegal. Section 6.6 No Material Adverse Effect. Since the date hereof, no event -------------------------- shall have occurred such that there would be a material adverse change in the Condition of the Company and its subsidiaries taken as a whole. ARTICLE VII CONDITIONS PRECEDENT TO THE ---------------------------- OBLIGATIONS OF THE SELLERS -------------------------- Section 7. Conditions Precedent to Obligations of the Sellers. The -------------------------------------------------- obligations of the Sellers to sell the Stock to Sub is subject to the satisfaction, at or prior to the Closing, of each of the following conditions: Section 7.1 Truth of Representations and Warranties. The representations --------------------------------------- and warranties of Parent and Sub contained in this Agreement shall be true and correct in all material respects as if such representations and warranties were made at the Closing, and the Company shall have received a certificate signed by an executive officer of Parent, dated the Closing Date, to such effect. Section 7.2 Performance of Agreements. Each of Parent and Sub shall have ------------------------- performed in all material respects all obligations and complied in all materials respects with all agreements and covenants to be performed and complied with by it under this Agreement, and the Company shall have received a certificate signed by an executive officer of Parent, dated the Closing Date, to such effect. Section 7.3 HSR Act Waiting Periods. All applicable waiting periods under ----------------------- the HSR Act with respect to the transactions contemplated by this Agreement shall have expired or been terminated. Section 7.4 Injunction. No preliminary or permanent injunction or other ---------- order shall have been issued by any court or by any governmental or regulatory agency, body or authority which prohibits, restrains, enjoins or restricts the consummation of the transactions contemplated by this Agreement and which is in effect at the Closing, provided that, in the case of a decree, injunction or -------- ---- other order, each of the parties shall have used all reasonable efforts to prevent the entry of any such injunction or other order and to appeal as promptly as possible any decree, injunction or other order that may be entered. Section 7.5 Statutes. No statute, rule, regulation, executive order, -------- decree or order of any kind shall have been enacted, entered, promulgated or enforced by any court or governmental authority which prohibits, restrains, enjoins or restricts the consummation of the transactions -20- contemplated by this Agreement or has the effect of making any of the transactions contemplated by this Agreement illegal. ARTICLE VIII TERMINATION AND ABANDONMENT Section 8.1 Termination. This Agreement may be terminated and the ----------- transactions contemplated hereby may be abandoned, at any time prior to the Closing: (a) by mutual written consent of SMG-II, on the one hand, and of Parent, on the other hand; (b) by either Parent, on the one hand, or SMG-II, on the other hand, if any governmental or regulatory agency shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree or ruling or other action shall have become final and nonappealable; (c) by either Parent, on the one hand, or the Company, on the other hand, if the Closing shall not have occurred by December 15, 1999, unless the Closing shall not have occurred because of a material breach of any representation, warranty, obligation, covenant, agreement or condition set forth in this Agreement on the part of the party seeking to terminate this Agreement; and (d) by Parent, at any time within 30 days after delivery to it pursuant to Section 5.7(b)(i) of the audited consolidated financial statements of each of the Company and of Pathmark for the fiscal year ended January 30, 1999, in the event that such financial statements disclose (i) a consolidated shareholder's deficiency of (x) the Company greater than $1,453,000,000 or (y) Pathmark greater than $1,188,400,000, in each case as of the end of such fiscal year or (ii) net losses of (x) the Company materially greater than $29,321,000 or (y) Pathmark materially greater than $28,420,000, in each case for the fiscal year then ended. Section 8.2 Automatic Termination. This Agreement shall automatically be --------------------- terminated and the transactions contemplated hereby shall automatically be abandoned if, at any time prior to the Closing, all of the conditions set forth in Articles VI and VII of the Merger Agreement are satisfied immediately prior to the Merger Closing. Section 8.3 Effect of Termination. In the event of the termination of --------------------- this Agreement pursuant to Section 8.1 or Section 8.2 (other than in the case of termination pursuant to Section 8.1(a)) hereof by Parent, on the one hand, or SMG-II, on the other hand, written notice thereof shall forthwith be given to the other party specifying the provision hereof pursuant to which this Agreement is terminated, and this Agreement shall become void and have no effect, and there shall be no liability hereunder on the part of Parent, Sub or SMG-II, except that Sections 3.12, 5.2, 5.3(l), 9.1, 9.5 and this Section 8.3 shall survive any termination of this Agreement. Nothing -21- in this Section 8.3 shall relieve any party to this Agreement of liability for breach of this Agreement. ARTICLE IX TAX MATTERS ----------- Section 9.1 Tax Returns. SMG-II shall have the obligation to prepare and ----------- timely file, or cause to be prepared and timely filed, all returns, statements, forms and reports for Taxes ("Returns") that are required by law to be filed ------- by, or with respect to, the Company or any of its subsidiaries with respect to any taxable year or period ending on or before and, with respect to any taxable year or period beginning before and ending after the Closing Date, the portion of such taxable year or period ending on and including the Closing Date ("Pre- Closing Period"); provided, however, with respect to Returns to be filed by SMG- -------- ------- II pursuant to this Section 9.1 for the Pre-Closing Period, (i) SMG-II shall provide Parent with draft Federal, state, local and foreign income tax returns that include the Company or any of its subsidiaries at least thirty (30) days prior to the due date for filing such Returns, (ii) at least fifteen (15) days prior to the due date for the filing of such Returns, Parent shall notify SMG-II of the existence of any objection Parent may have to any items set forth on such draft Returns, and (iii) if, after consulting in good faith, SMG-II and Parent are unable to resolve such objection(s), such objection(s) shall be resolved by treating items on such Returns in a manner consistent with the past practices of the Company and its subsidiaries, if any, with respect to such items unless otherwise required by law (and if no past practice exists the issue shall be resolved in favor of the party that would bear the relevant Tax liability hereunder). At the request of SMG-II, the Company will prepare the Returns described in this Section 9.1 (or any such Return specified), including any Returns required to be filed by SMG-II (or any of its subsidiaries) that includes the Company or any of its subsidiaries for the tax year of the SMG-II consolidated group that includes the Closing Date, in a manner consistent with this Section 9.1. Parent and SMG-II agree to the extent permitted by applicable law to elect with the relevant taxing authority to treat for all purposes the Closing Date as the last day of a taxable period of the Company and its subsidiaries. Section 9.2 Payment of Taxes. (a) SMG-II and its subsidiaries other than ---------------- the Company and its subsidiaries (the "SMG-II Group") shall be responsible and liable for the timely payment of any and all Taxes imposed on or with respect to the properties, income and operations of the SMG-II Group, including any gain to the SMG-II Group resulting from the sale of the Stock. (b) The Company shall pay SMG-II the amount of any Taxes allocated to the Company and its subsidiaries in connection with the filing of a Return pursuant to Section 9.1 above (including Taxes that may become payable as the result of an adjustment by any taxing authority in respect of a Pre-Closing Period) to the extent not already paid by the Company or any of its subsidiaries on or before the Closing Date. To the extent reasonably practicable, at least ten (10) days prior to the due date for the filing of any such Return, SMG-II shall provide to Parent its calculation of the amount of such Taxes allocable to the Company and its subsidiaries pursuant to this Section 9.2(b). No later than five (5) days prior to the due date for the filing of such Return, Parent shall notify SMG-II of any reasonable objections Parent may have to SMG-II's calculation -22- of the amount of such Taxes allocable to the Company and its subsidiaries pursuant to this Section 9.2(b), and, at such time, the Company and its subsidiaries shall pay to SMG-II the amount of Taxes allocable to the Company and its subsidiaries pursuant to this Section 9.2(b) as determined by SMG-II. Any objection Parent may have with respect to SMG-II's calculation of the amount of such Taxes allocable to the Company and its subsidiaries pursuant to this Section 9.2(b) shall not be cause for any failure of the Company and its subsidiaries to make payments to Parent pursuant to this Section 9.2(b). Parent and SMG-II agree to consult and resolve in good faith any such objection, it being understood and agreed that in the absence of any such resolution, any and all objections shall be resolved by treating items, wherever possible, in a manner consistent with the past practices of the Company and its subsidiaries with respect to such items unless otherwise required by law. In the event Parent shall receive SMG-II's calculation of the amount of such Taxes allocable to the Company and its subsidiaries pursuant to this Section 9.2(b) and a draft of the relevant portions of such Return less than ten (10) days prior to the due date for filing such Return, the Company and its subsidiaries shall nevertheless endeavor in good faith to make payment to SMG-II by such due date. (c) The SMG-II Group shall pay the Company the amount of any Taxes that are refunded, or in respect of which the SMG-II Group obtains a credit usable by the SMG-II Group as an offset against taxes owed by the SMG-II Group, as the result of an adjustment by any taxing authority that are allocable to the Company or any of its subsidiaries (net of any Taxes that are owed to any taxing authority as the result of an adjustment by such authority relating to a Pre- Closing Period that are allocable to the Company or any of its subsidiaries). Section 9.3 Controversies. (a) Each party shall promptly notify the ------------- other in writing upon receipt by such party or any Affiliate of such party of written notice of any inquiries, claims, assessments, audits or similar events with respect to Taxes for which the other party may be liable (any such inquiry, claim, assessment, audit or similar event, a "Tax Matter"). ---------- (b) Parent shall have the sole right to control any Tax Matter, initiate any claim for refund with respect to the Company or any of its subsidiaries, and contest, resolve and defend against any assessment for additional Taxes, notice of Tax deficiency or other adjustment of Taxes of, or relating to, the income, assets or operations of the Company or any of its subsidiaries for all taxable periods to the extent that such Tax Matter or claim does not have an adverse impact on the SMG-II Group (or any of its members). SMG-II shall have the sole right to control any Tax Matter, initiate any claim for refund with respect to the SMG-II Group, and contest, resolve and defend against any assessment for additional Taxes, notice of Tax deficiency or other adjustment of Taxes of, or relating to, the income, assets or operations of the SMG-II Group (or any of its members) for all taxable periods to the extent that such Tax Matter or claim does not have an adverse impact on the Company or any of its subsidiaries. Section 9.4 Amended Returns. Neither party shall file or cause to be --------------- filed any amended Return or claims for refund that would result in an increased Tax liability of the other party without the prior written consent of such other party, which consent shall not be unreasonably withheld. -23- Section 9.5 Prior Tax Agreements. This Agreement terminates and -------------------- supersedes any and all of the tax sharing, allocation, indemnification or similar agreements, arrangements or undertakings in effect on the Closing Date as between the SMG-II Group or any predecessor or Affiliate thereof, on the one hand, and the Company and any of its subsidiaries, on the other hand, for all Taxes imposed by any government or taxing authority, regardless of the period in which such Taxes are imposed. Section 9.6 Post-Closing Access and Cooperation. (a) From and after the ----------------------------------- Closing Date, SMG-II agrees, and agrees to cause each of its subsidiaries, to permit Parent or a representative of Parent to have reasonable access, during normal business hours, to the books and records of the SMG-II Group, to the extent that such books and records relate to a Pre-Closing Period, and personnel, for the purpose of enabling Parent to (i) prepare the Returns specified in Section 9.1 and (ii) investigate or contest any Tax Matter which Parent has the authority to conduct under Section 9.3. (b) From and after the Closing Date, Parent agrees, and agrees to cause the Company and each of its subsidiaries, to permit SMG-II to have reasonable access, during normal business hours, to the books and records of the Company and its subsidiaries, to the extent that such books and records relate to a Pre- Closing Period, and personnel, for the purpose of enabling SMG-II to (i) prepare the Returns specified in Section 9.1 and (ii) investigate or contest any Tax Matter which SMG-II has the authority to conduct under Section 9.3. ARTICLE X MISCELLANEOUS Section 10.1 Fees and Expenses. All costs and expenses incurred in ----------------- connection with this Agreement and the consummation of the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, except that the Company shall pay the costs and expenses of SMG-II and PTK. Section 10.2 Representations and Warranties. The respective ------------------------------ representations and warranties of the Sellers, on the one hand, and Parent and Sub, on the other hand, contained herein or in any certificates or other documents delivered prior to or at the Closing shall not be deemed waived or otherwise affected by any investigation made by any party. Each and every such representation and warranty shall expire with, and be terminated and extinguished by, the Closing and thereafter none of the Sellers, Parent or Sub shall be under any liability whatsoever with respect to any such representation or warranty. This Section 10.2 shall have no effect upon any other obligation of the parties hereto, whether to be performed before or after the Closing. Section 10.3 Extension; Waiver. At any time prior to the Closing, the ----------------- parties hereto, by action taken by or on behalf of the respective Boards of Directors of SMG-II, PTK, Parent or Sub, may (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein by any other applicable party or in any document, certificate or writing delivered pursuant hereto by any other applicable party or (iii) waive compliance with any of the agreements or -24- conditions contained herein. Any agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. Section 10.4 Public Announcements. The Sellers, on the one hand, and -------------------- Parent and Sub, on the other hand, agree to consult promptly with each other prior to issuing any press release or otherwise making any public statement with respect to the transactions contemplated hereby, and shall not issue any such press release or make any such public statement prior to such consultation and review by the other party of a copy of such release or statement, unless required by applicable law. Section 10.5 Governing Law. This Agreement, and the legal relations ------------- between the parties hereto, shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements executed and to be performed solely within such State. Section 10.6 Captions. The Article and Section captions used herein are -------- for reference purposes only, and shall not in any way affect the meaning or interpretation of this Agreement. Section 10.7 Notices. Any notice, delivery or other communication ------- required or permitted under this Agreement shall be sufficiently given if delivered in person or sent by telecopy (with receipt confirmed) or by registered or certified mail, postage prepaid, addressed as follows: If to either Parent or Sub: Koninklijke Ahold NV Albert Heijnweg 1 1507 EH Zaandam, P.O. Box 33 1500 EA Zaandam, The Netherlands Telecopier: 31-75-659-83-66 Attention: Paul P.J. Butzelaar, Esq. Ton van Tielraden, Esq. and White & Case 1155 Avenue of the Americas New York, New York 10036 Telecopier: (212) 354-8113 Attention: John M. Reiss, Esq. -25- If to the Sellers: c/o SMG-II Holdings Corporation 200 Milik Street Carteret, NJ 07008-1194 Telecopier: (732) 499-3460 Attention: James Donald Marc A. Strassler, Esq. with a copy to: Shearman & Sterling 599 Lexington Avenue New York, NY 10022-7179 Telecopier: (212) 848-7179 Attention: Spencer D. Klein, Esq. Rohan Weerasinghe, Esq. or to such other person as shall be designated in writing by any such party, and such notice or communication shall be deemed to have been given as of the date so delivered, sent by telecopier or mailed. Section 10.8 Binding Effect; Benefit; Assignment. This Agreement shall ----------------------------------- inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties; provided, however, that Sub may assign and -------- ------- delegate, in its sole discretion, its rights, interests and obligations hereunder to any direct or indirect wholly-owned subsidiary of Parent. Notwithstanding anything contained in this Agreement to the contrary, except for the provisions of Section 5.10 (the "Third Party Provisions"), nothing in this ---------------------- Agreement, expressed or implied, is intended to confer on any Person other than the parties hereto or their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. The Third Party Provisions may be enforced by the beneficiaries thereof. Section 10.9 Counterparts. This Agreement may be executed in two or more ------------ counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. Section 10.10 Entire Agreement. This Agreement, including the other ---------------- documents entered into in connection herewith, contains the entire understanding of the parties hereto with respect to the subject matter contained herein and therein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. -26- Section 10.11 Amendments. This Agreement may not be changed, amended, ---------- waived, or modified orally, but only by an agreement in writing signed by the parties hereto. Section 10.12 Severability. If any term or other provision of this ------------ Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon a determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the maximum extent possible. Section 10.13 Disclosure Letter. The parties hereto acknowledge that ----------------- certain matters set forth in the Disclosure Letter are included for informational purposes only, notwithstanding the fact that, because they do not rise above applicable materiality thresholds or otherwise, they would not be required to be set forth therein by the terms of this Agreement and that disclosure of such matters shall not be taken as an admission by the Sellers that such disclosure is required to be made under the terms of any provision of this Agreement. Section 10.14 Submission to Jurisdiction; Waiver of Jury Trial. The ------------------------------------------------ parties hereby submit to the jurisdiction of the United States District Court for the Southern District of New York and of any New York State Court sitting in the City of New York for purposes of all legal proceedings which may arise hereunder or under any of the other documents entered into in connection herewith. The parties irrevocably waive, to the fullest extent permitted by law, any objection which it may have or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. The parties hereby consent to process being served in any such proceeding by the mailing of a copy thereof by registered or certified mail, postage prepaid, to their respective addresses specified in Section 10.7 or in any other manner permitted by law. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER DOCUMENTS ENTERED INTO IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OF ANY PARTY. -27- IN WITNESS WHEREOF, each party has caused its corporate name to be hereunto subscribed by its officer thereunto duly authorized, all as of the day and year first above written. KONINKLIJKE AHOLD N.V. By: /s/ Robert G. Tobin ----------------------------------- Name: R.G. Tobin Title: Executive Vice President AHOLD ACQUISITION, INC. By: /s/ Robert G. Tobin ----------------------------------- Name: R.G. Tobin Title: President SMG-II HOLDINGS CORPORATION By: /s/ James L. Donald ----------------------------------- Name: James L. Donald Title: Chairman, President and Chief Executive Officer PTK HOLDINGS, INC. By: /s/ James L. Donald ----------------------------------- Name: James L. Donald Title: Chairman, President and Chief Executive Officer -28- -----END PRIVACY-ENHANCED MESSAGE-----