-----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, WXsYbKl3amvvRmvyyBhYcG8ZiTvHdRBdGku6NQUQ4w+Lzc66uImwdo0NeNEkxSC3 tPXpcdtu84Ph5RnTmJetpw== 0001005477-99-002582.txt : 19990521 0001005477-99-002582.hdr.sgml : 19990521 ACCESSION NUMBER: 0001005477-99-002582 CONFORMED SUBMISSION TYPE: SC 14D9/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19990520 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 14D9/A SEC ACT: SEC FILE NUMBER: 005-41218 FILM NUMBER: 99631135 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: 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 14D9/A 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 SC 14D9/A 1 AMENDMENT NO. 2 TO SCHEDULE 14D-9 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------------- SCHEDULE 14D-9 (Amendment No. 2) Solicitation/Recommendation Statement Pursuant to Section 14(d)(4) of the Securities Exchange Act of 1934 SUPERMARKETS GENERAL HOLDINGS CORPORATION (Name of Subject Company) ---------------------------- SUPERMARKETS GENERAL HOLDINGS CORPORATION (Name of Person Filing Statement) $3.52 Cumulative Exchangeable Redeemable Preferred Stock, par value $.01 per share (Title of Class of Securities) 868446204 (CUSIP Number of Class of Securities) ------------------------------ Marc A. Strassler, Esq. Senior Vice President, Secretary and General Counsel Supermarkets General Holdings Corporation 200 Milik Street Carteret, New Jersey 07008-1194 (732) 499-3000 (Name, Address and Telephone Number of Person authorized to Receive Notices and Communications on Behalf of the Person Filing Statement) ----------------------------- With a copy to: Spencer D. Klein, Esq. Shearman & Sterling 599 Lexington Avenue New York, New York 10022 212-848-4000 ================================================================================ This Amendment No. 2 amends and supplements the Solicitation/Recommendation Statement on Schedule 14D-9, dated March 15, 1999, as amended by Amendment No. 1, dated March 26, 1999 (as amended, the "Schedule 14D-9") relating to a tender offer disclosed in the Tender Offer Statement on Schedule 14D-1, dated March 15, 1999, as amended by Amendment No. 1, dated March 26, 1999 and Amendment No. 2, dated May 20, 1999 (as amended, the "Schedule 14D-1") filed by Koninklijke Ahold N.V., a company organized under the laws of The Netherlands ("Parent"), Croesus, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Parent, Ahold U.S.A. Inc., a Delaware corporation and an indirect wholly owned subsidiary of Parent, and Ahold Acquisition, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Parent, to purchase all of the issued and outstanding shares of $3.52 Cumulative Exchangeable Redeemable Preferred Stock, par value $.01 per share (the "Preferred Stock"), 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. Capitalized terms used but not defined herein have the meanings ascribed to such terms in the Schedule 14D-9. Item 8. ADDITIONAL INFORMATION TO BE FURNISHED Item 8 is hereby amended and supplemented to add the following: Settlement of Litigation. As previously described in the Schedule 14D-9, the Company, SMG-II, the Purchaser and the directors of the Company are defendants (collectively, the "Defendants") in a purported stockholder class action lawsuit entitled Wolfson v. Supermarkets General Holdings Corporation, et al., C.A. No. 17047 (the "Action"), in which the plaintiff alleged, among other things, that the defendant directors of the Company and SMG-II breached their fiduciary duties to the holders of the Preferred Stock. The plaintiff, by his counsel, has entered into a Memorandum of Understanding, dated May 19, 1999 (the "Memorandum of Understanding"), with the Defendants (by their counsel) pursuant to which the parties have agreed to settle the Action. The proposed settlement is subject to, among other things, the approval of the settlement by the Court of Chancery of the State of Delaware (the "Court"). The Memorandum of Understanding provides for the following: (i) the certification of the Action as a class action under the rules of the Court, which class would consist of all holders of the Preferred Stock of the Company from and including March 9, 1999 through and including the consummation of the SMG-II Merger, or, if the SMG-II Merger fails to close, the Alternative Stock Purchase (the "Class"); (ii) the complete and final compromise, settlement, discharge and release of all claims, demands, rights, actions, causes of action, liabilities, damages, losses, obligations, judgments, suits, matters and issues of any kind or nature whatsoever, whether known or unknown, contingent or absolute, suspected or unsuspected, disclosed or undisclosed, hidden or concealed, matured or unmatured, arising under federal, state or any other law, that have been, could have been, or in the future can or might be asserted in the Action or in any court, tribunal or proceeding by or on behalf of any member of the Class (the "Releasing 2 Parties"), whether individual, class, derivative, representative, legal, equitable or any other type or in any other capacity, against Defendants or any of their families, parent entities, affiliates, subsidiaries, predecessors, successors or assigns, and each and all of their respective past, present or future officers, directors, associates, stockholders, controlling persons, representatives, employees, attorneys, financial or investment advisors, consultants, accountants, investment bankers, commercial bankers, engineers, advisors, insurers or agents, heirs, executors, trustees, general or limited partners or partnerships, personal representatives, estates or administrators, predecessors, successors and assigns (collectively, the "Released Persons"), which have arisen, could have arisen, or will arise out of, or which are related in any manner to, the allegations, facts, events, transactions, acts, occurrences, statements, representations, misrepresentations, omissions or any other matter, set forth or otherwise related, directly or indirectly, to the complaint filed in the Action, the SMG-II Merger, the Alternative Stock Purchase, public filings or statements by Defendants or their representatives in connection with the SMG-II Merger or the Alternative Stock Purchase, or any other actions of the Defendants relating in any way to the SMG-II Merger or the Alternative Stock Purchase (collectively, the "Settled Claims") (subject to certain limited exceptions); (iii) the Defendants have denied, and continue to deny, that they have committed or attempted to commit any violation of law or breaches of duty of any kind; and (iv) the Defendants are entering into the Memorandum of Understanding and will be entering into the proposed settlement documentation solely because the proposed settlement would eliminate the burden, risk and expense of further litigation and is in the best interests of the Company and all of its stockholders. In addition, the Company has agreed to amend the Schedule 14D-9 to provide certain supplemental information. In addition, the parties have agreed in the Memorandum of Understanding that plaintiff's counsel in the Action will apply to the Court for a total award of attorneys' fees and expenses in an amount not to exceed $1,956,268.40, or $0.40 per share of Preferred Stock, which Defendants have agreed not to oppose, provided, however, such amount shall be payable only after Final Court Approval (as defined below), and only if the Offer at the New Offer Price (as defined below) closes. In the event the Offer at the New Offer Price does not close, but the Alternative Stock Purchase does, pursuant to the terms of the Memorandum of Understanding, the Released Persons shall continue to enjoy all of the benefits of the settlement and plaintiff's counsel reserves their right to petition the Court for an award of attorneys' fees and expenses, and the Defendants reserve their rights to oppose any such petition. Pursuant to the terms of the Memorandum of Understanding, the Defendants have agreed, subject to Final Court Approval, that the Purchaser shall increase the Offer Price to $40.25 per share of Preferred Stock, less the total amount awarded as fees and expenses to plaintiff's counsel by the Court divided by the total number of outstanding shares of Preferred Stock (the "New Offer Price"). As described above, plaintiff's counsel currently intends to apply to the Court for an award of fees and expenses in an aggregate amount of $1,956,268.40, or $0.40 per share of Preferred Stock. Thus, if the Court approves the settlement and the fees and 3 expenses of counsel for the plaintiff in full, the New Offer Price will be $39.85 per share of Preferred Stock. In addition, promptly following the approval of the settlement by the Court, the Defendants have also agreed to amend the SMG-II Merger Agreement and the Alternative Stock Purchase Agreement to permit either party to the SMG-II Merger Agreement and the Alternative Stock Purchase Agreement, in the event that Final Court Approval is not obtained on or prior to November 15, 1999, to extend unilaterally the December 15, 1999 termination date set forth in the SMG-II Merger Agreement and the Alternative Stock Purchase Agreement, to a new date 30 days after the date of the Final Court Approval or a final determination that does not constitute Final Court Approval (the "New Termination Date"), provided, however, that the New Termination Date shall not in any event be later than April 17, 2000 unless otherwise mutually agreed by the parties to the SMG-II Merger Agreement and the Alternative Stock Purchase Agreement, respectively. The Defendants have also agreed that the Purchaser, at its sole option, may elect on any date during the period from March 1, 2000 through April 1, 2000, if prior to such date neither Final Court Approval nor a final determination that does not constitute Final Court Approval (an "Adverse Determination") has been received, to cause the SMG-II Merger Agreement to be amended to reduce the merger consideration to be received by the holders of the capital stock of SMG-II pursuant to the SMG-II Merger Agreement by $9,781,342 (being the product of (x) the amount equal to the difference between the New Offer Price and the Offer Price and (y) the number of outstanding shares of Preferred Stock) (the "Escrow Amount"), which amount shall be held in escrow for the benefit of the holders of the Preferred Stock pending Final Court Approval. Upon any such election by the Purchaser, pursuant to the terms of the Memorandum of Understanding, the Purchaser shall be deemed to have waived on behalf of all parties any requirement under the settlement of obtaining Final Court Approval prior to closing the Offer and the SMG-II Merger or the Alternative Stock Purchase. In addition, the Defendants have agreed that in the event that the Purchaser makes such an election, but Final Court Approval ultimately is not obtained, the Escrow Amount, (i) if the Offer closes, shall remain in escrow and be available for satisfaction of an adverse judgment against Defendants, if any, or (ii) if the Alternative Stock Purchase closes, shall be released to PTK. In addition, the Defendants have also agreed that in the event that an Adverse Determination is received at any time before termination or closing of the Offer, then the parties shall proceed with the SMG-II Merger and Alternative Stock Purchase on the terms set forth in the original SMG-II Merger Agreement or original Alternative Stock Purchase Agreement; provided, however, that if the Purchaser has made the election described above and subsequent to such election, but prior to the closing of the Offer or the Alternative Stock Purchase, an Adverse Determination is received, then the parties shall proceed with the SMG-II Merger or the Alternative Stock Purchase on the terms set forth in the original SMG-II Merger Agreement and 4 the original Alternative Stock Purchase Agreement only if SMG-II provides notice to the Purchaser by April 1, 2000 of its election to proceed on those terms. Pursuant to the terms of the Memorandum of Understanding, any of the Defendants shall have the right to withdraw from the proposed settlement in the event that (i) any claims related to the SMG-II Merger, the Alternative Stock Purchase, or the subject matter of the Action are commenced by any member of the Class against any Released Persons in any court prior to Final Court Approval of the settlement, and the court in which such claims are pending denies Defendants' application to dismiss or stay such action in contemplation of dismissal or (ii) any of the other conditions to the consummation of the settlement described below shall not have been satisfied. The consummation of the settlement is subject to (i) the drafting and execution of the settlement documents and the other agreements necessary to effectuate the terms of the proposed settlement; (ii) Final Court Approval of the settlement; (iii) dismissal of the Action by the Court with prejudice and without awarding fees or costs to any party; and (iv) the Purchaser closing (A) the Offer and the SMG-II Merger or (B) the Alternative Stock Purchase. For purposes hereof, "Final Court Approval" of the settlement means an order entered by the Court approving the settlement and awarding plaintiff's counsel's fees and expenses and such order is finally affirmed, without modification of any substantive right of any party to the Memorandum of Understanding, on appeal or is no longer subject to appeal and time for any petition for reargument, appeal or review, by certiorari or otherwise, has expired, provided that any modification of the order approving the settlement with respect to the amount of attorneys' fees and expenses awarded and/or any additional supplemental disclosure required shall not be considered a modification of a substantive right affecting Final Court Approval. Extension Agreement. Concurrently with the execution of the Memorandum of Understanding and as required by Parent and the Purchaser, Parent, the Purchaser and the SMG-II Stockholders entered into an extension agreement, pursuant to which the SMG-II Stockholders have agreed to extend the Stockholders Agreement Termination Date to a new date that is two months after the New Termination Date. Item 9. MATERIAL TO BE FILED AS EXHIBITS The following are hereby added as exhibits: Exhibit No. - ----------- (a) (12) Press release issued by the Company on May 19, 1999. (a) (13) Press release issued by Parent on May 20, 1999. (c) (9) Memorandum of Understanding dated May 19, 1999. +(c) (10) Extension Agreement dated May 19, 1999 among Parent, the Purchaser and the Stockholders listed on Exhibit I thereto. - ------------------------------- + Filed as an exhibit to the Schedule 14D-1 and is incorporated herein by reference. 5 SIGNATURE After reasonable 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. Supermarkets General Holdings Corporation By: /s/ Marc A. Strassler --------------------------------------- Name: Marc A. Strassler Title: Senior Vice President, Secretary and General Counsel Dated: May 20, 1999 EXHIBIT INDEX Exhibit No. - ----------- *(a)(1) Offer to Purchase dated March 15, 1999. *(a)(2) Letter of Transmittal dated March 15, 1999. *(a)(3) Agreement and Plan of Merger dated March 9, 1999 among Parent, the Purchaser and SMG-II. *(a)(4) Stock Purchase Agreement dated March 9, 1999 among Parent, the Purchaser, SMG-II and PTK. *(a)(5) Stockholders Agreement dated March 9, 1999 among Parent, the Purchaser and Stockholders listed on Exhibit I thereto. *(a)(6) Confidentiality Agreement dated December 30, 1998 between Parent and SMG-II. *(a)(7) A copy of pages 58 through 63 of the Annual Report on Form 10K that was filed by the Company with the SEC on April 28, 1998. *(a)(8) Sale and Transition agreement between Pathmark and James L. Donald dated March 8, 1999. *(a)(9) Letter from the Company to holders of the Shares dated March 15, 1999. *(a)(10) Joint Press Release issued by the Company and Parent on March 9, 1999. *(a)(11) Press Release issued by Parent on March 26, 1999. (a)(12) Press Release issued by the Company on May 19, 1999. (a)(13) Press Release issued by Parent on May 20, 1999. *(c)(1) Employment Agreement between Pathmark and Eileen Scott dated February 1, 1999. *(c)(2) Employment Agreement between Pathmark and John Sheehan dated February 1, 1999. *(c)(3) Employment Agreement between Pathmark and Marc A. Strassler dated February 1, 1999. *(c)(4) Employment Agreement between Pathmark and Frank Vitrano dated February 1, 1999. *(c)(5) Employment Agreement between Pathmark and Joseph Adelhardt dated February 1, 1999. *(c)(6) Employment Agreement between Pathmark and Harvey Gutman dated February 1, 1999. *(c)(7) Employment Agreement between Pathmark and Robert Joyce dated February 1, 1999. *(c)(8) Employment Agreement between Pathmark and Myron D. Waxberg dated February 1, 1999. (c)(9) Memorandum of Understanding dated May 19, 1999. +(c)(10) Extension Agreement dated May 19, 1999 among Parent, the Purchaser and the Stockholders listed on Exhibit I thereto. - ------------------------------- * Previously filed. + Filed as an exhibit to the Schedule 14D-1 and is incorporated herein by reference. EX-99.(A)(12) 2 RELEASE Exhibit (a)(12) SUPERMARKETS GENERAL HOLDINGS CORPORATION 200 Milik Street, Carteret, New Jersey 07008 FOR IMMEDIATE RELEASE Contact: Harvey Gutman 732-499-3205 - -------------------------------------------------------------------------------- Carteret, New Jersey, May 19, 1999. Supermarkets General Holdings Corporation ("SMGH") announced today that it and the other defendants in a purported stockholder class action lawsuit have reached an agreement in principle with the plaintiff to settle. The lawsuit, entitled Wolfson v. Supermarkets General Holding Corporation, et. al., C.A. No. 17047, was filed on March 23, 1999, on behalf of the holders of the SMGH preferred stock against SMGH and its directors, its parent company SMG-II Holdings Corporation and Royal Ahold's wholly-owned subsidiary Ahold Acquisition, Inc. The action relates to the pending tender offer by Ahold Acquisition to purchase all of the outstanding shares of preferred stock of SMGH at $38.25 per share that was announced on March 9, 1999. The offer has been made pursuant to an agreement under which Royal Ahold, the international food retailer, will acquire all of the outstanding shares of the capital stock of SMG-II. SMG-II controls the U.S. supermarket company Pathmark Stores, Inc. The proposed settlement is subject to, among other things, execution of a definitive settlement agreement and related documentation with the plaintiff and the approval of the settlement by the Court of Chancery of the State of Delaware (the "Court"). Upon such approval becoming final, SMGH and Ahold Acquisition have agreed that Ahold Acquisition will increase the offer price in its tender offer to $40.25 per share of SMGH preferred stock, less any fees and expenses awarded to plaintiff's counsel by the Court. Plaintiff's counsel currently intends to apply to the Court for an award of fees and expenses in an aggregate amount of $1,956,268.40, or $0.40 per share of SMGH preferred stock. Thus, if the Court approves the settlement and the counsel for the plaintiff's petition for fees and expenses in full, the amended offer price will be $39.85 per share of SMGH preferred stock. ***** EX-99.(A)(13) 3 TENDER OFFER Exhibit (a)(13) May 20, 1999 31 75 659-5720 Royal Ahold extends tender offer Zaandam, The Netherlands, May 20, 1999 - Ahold Acquisition, Inc., a wholly-owned subsidiary of Royal Ahold, is extending the tender offer for the Preferred Stock of Supermarkets General Holdings Corporation ("SMGH") until 5:00 p.m., New York City time, on Friday, September 3, 1999. The offer had been scheduled to expire on Friday, May 21, 1999. The offer has been made pursuant to an agreement under which Royal Ahold will acquire all of the outstanding shares of the capital stock of SMG-II Holdings Corporation ("SMG-II"). SMG-II controls the US supermarket company Pathmark Stores Inc. Based upon information provided by Citibank N.A., as depositary for the offer, as of the close of business on May 17, 1999, approximately 1.1 million shares (22.4%) of the outstanding Preferred Stock have been tendered and not withdrawn. Completion of the tender offer is subject to a number of conditions, including obtaining necessary regulatory approvals and at least 66 2/3% of the shares of Preferred Stock being tendered in the offer and not withdrawn. (It is standard practice that the majority of shares will not be tendered until the final two days of the offering period.) Ahold Acquisition agreed to extend the tender offer in connection with a Memorandum of Understanding that has been entered into on May 19th. The Memorandum set forth an agreement in principle of all concerned parties to settle a purported stockholder class action lawsuit on behalf of the holders of the SMGH Preferred Stock that had been brought against SMGH, its directors, its parent company SMG-II and Ahold Acquisition. The action relates to the pending tender offer and the allocation of the total consideration to be paid in the transaction among the equity owners of SMGH and SMG-II. The proposed settlement is subject to a number of conditions, including the approval of the settlement by the Court of Chancery of the State of Delaware. If such approval becomes final, Ahold Acquisition has agreed to amend its tender offer to increase the offer price for the SMGH Preferred Stock to $40.25 per share, less any fees and expenses awarded to plaintiff's counsel by the court (which could total $0.40 per share of SMGH Preferred Stock). In such event, the total amount of merger consideration to be paid to the holders of the capital stock of SMG-II will be reduced accordingly. As a result, the overall consideration Ahold Acquisition will pay in connection with the Pathmark acquisition will not increase. The total price payable by Ahold Acquisition for all of the capital stock of SMG-II and the preferred stock of SMGH is approximately USD 250 million. Pursuant to the agreement, Royal Ahold will also indirectly assume all of the indebtedness of Pathmark, amounting to approximately USD 1.5 billion. Ahold Public Relations, tel. +31 75 659 5720 After office hours: Hans Gobes: +31 6 55 82 22 98/Jans Hol: +31 6 22 933 137 EX-99.(C)(9) 4 MEMORANDUM Exhibit (c)(9) MEMORANDUM OF UNDERSTANDING This MEMORANDUM OF UNDERSTANDING is entered into as of May 19, 1999 among the plaintiff ("Plaintiff") in the Action (as defined herein), and Supermarkets General Holdings Corporation ("SMG"), SMG-II Holdings Corporation ("SMG-II"), members of SMG's Board of Directors, and Ahold Acquisition, Inc. ("Ahold") (collectively, "Defendants") by the undersigned attorneys. WHEREAS, there is now pending an action in the Court of Chancery of the State of Delaware, styled Wolfson v. Supermarkets General Holdings Corp., et al., C.A. No. 17047 (the "Action"); and WHEREAS, the Action was filed as a putative class action on behalf of the public holders of SMG's $3.52 Cumulative Exchangeable Redeemable Preferred Stock, par value $0.01 per share (the "Preferred Stock"), relating to the proposed acquisition of SMG-II and SMG, the ultimate corporate parents of Pathmark Stores, Inc. ("Pathmark"), via a tender offer and merger (the "Transaction"), and an alternative transaction structure whereby, under certain circumstances, Ahold will acquire the Pathmark stock owned by PTK Holdings, Inc. ("PTK"), a wholly-owned subsidiary of SMG (the "Alternative Transaction"); and WHEREAS, the Action names as defendants SMG, SMG-II, Ahold, and individual members of the SMG Board of Directors; and WHEREAS, the Action seeks injunctive and declaratory relief and/or monetary damages with respect to the Transaction and the Alternative Transaction based upon the allegation, inter alia, that the conduct of SMG-II (as majority shareholder of SMG) and the members of the SMG Board of Directors in connection with the Transaction and the Alternative Transaction constitutes a breach of their fiduciary duties, aided and abetted by Ahold; and WHEREAS, the Defendants deny that they have committed or have attempted to commit any violation of law or breach of duty, including breach of any duty to SMG's shareholders, or have otherwise acted in any improper manner; and WHEREAS, following expedited document production, depositions, briefing and arms-length negotiations between the parties, counsel for the parties have reached an agreement in principle providing for the proposed settlement of the Action on the terms and conditions set forth below (the "Settlement"); and WHEREAS, counsel for the parties believe that the proposed Settlement is in the best interests of the holders of the Preferred Stock; NOW THEREFORE, IT IS HEREBY AGREED IN PRINCIPLE AS FOLLOWS: -2- 1. Principal Terms of Settlement. Subject to the additional conditions, terms and limitations described herein, as a result of the bringing of the Action, the parties agree in principle as follows: (a) The price in Ahold's March 15, 1999 tender offer as set forth in its Offer to Purchase (the "Offer to Purchase"), and as thereafter extended (the "Tender Offer"), is $38.25 per share of Preferred Stock (the "Per Share Amount"). In consideration of the Settlement and release set forth herein and as a result of the Action, subject to Final Court Approval (as defined below), the Defendants agree to an increase of the Per Share Amount, such that Ahold will revise its Tender Offer to increase the Per Share Amount to $40.25 per share of Preferred Stock, less the total amount awarded as fees and expenses to Plaintiff's counsel by the Court divided by the total number of outstanding shares of Preferred Stock (the "New Per Share Amount"). Promptly following approval of the Settlement by the Delaware Court of Chancery, (1) the SMG-II Merger Agreement (as defined in the Schedule 14D-9 dated March 15, 1999) shall be amended (i) to permit either party to the SMG-II Merger Agreement, in the event that Final Court Approval is not obtained on or prior to November 15, 1999, to extend unilaterally the December 15, 1999 date set forth in Section 8.1(c) of such agreement to a new date thirty (30) days after -3- the date of Final Court Approval or a final determination that does not constitute Final Court Approval (the "New Drop Dead Date"), provided, however, that the New Drop Dead Date shall not in any event be later than April 17, 2000 unless otherwise mutually agreed by the parties to the SMG-II Merger Agreement, and (ii) to reflect that, during the time the Settlement remains operative only, a condition precedent to the obligations of the parties to the SMG-II Merger Agreement to consummate the Tender Offer shall be obtaining Final Court Approval, and (2) the Alternative Stock Purchase Agreement (as defined in the Schedule 14D-9) shall be amended to permit either party to the Alternative Stock Purchase Agreement, in the event that Final Court Approval is not obtained on or prior to November 15, 1999, to extend unilaterally the December 15, 1999 date set forth in Section 8.1(c) of such agreement to the New Drop Dead Date, provided, however, that the New Drop Dead Date shall not in any event be later than April 17, 2000 unless otherwise mutually agreed by the parties to the Alternative Stock Purchase Agreement. Each party to the SMG-II Merger Agreement shall sign such additional instruments and agreements necessary to give effect to such amendment, and, in the case of the Alternative Stock Purchase Agreement, SMG-II shall cause PTK to sign such additional instruments and agreements necessary to give effect to such amendment. Promptly following Final Court Approval of -4- the Settlement, (1) the SMG-II Merger Agreement shall be amended (i) to reflect the New Per Share Amount and corresponding reduction in merger consideration to be received by holders of capital stock of SMG-II pursuant to the SMG-II Merger Agreement, as set forth in the Settlement as approved, and (ii) to require SMG-II to obtain the necessary stockholder approval promptly in accordance with Section 5.4 of the SMG-II Merger Agreement but in no event later than ten (10) business days after Final Court Approval, (2) the Tender Offer shall be revised to increase the Per Share Amount to the New Per Share Amount, and (3) the Company Merger Agreement (as defined in the Schedule 14D-9) shall be amended to reflect the New Per Share Amount, as necessary. The aggregate amount of merger consideration allocated to the capital stock of SMG-II pursuant to the SMG-II Merger Agreement shall be reduced by (1) an amount equal to the increase in the aggregate price to be paid to the holders of the Preferred Stock pursuant to the Tender Offer and the Company Merger Agreement and (2) any fees and expenses awarded to Plaintiff's counsel by the Court. Under no circumstances shall Ahold be required to increase the amount of overall consideration it is paying in connection with the transactions contemplated by the SMG-II Merger Agreement, the Alternative Stock Purchase Agreement, and related documents. -5- Ahold, at its sole option, may elect on any date during the period from March 1, 2000 through April 1, 2000, if prior to such date neither Final Court Approval nor a final determination that does not constitute Final Court Approval (an "Adverse Determination") has been received, to cause the SMG-II Merger Agreement to be amended to reduce the merger consideration to be received by holders of the capital stock of SMG-II pursuant to the SMG-II Merger Agreement by $9,781,342 (being the amount equal to the difference between $40.25 per share and the Per Share Amount multiplied by the number of currently outstanding shares of Preferred Stock) (the "Escrow Amount"), which Escrow Amount shall be held in escrow for the benefit of the holders of the Preferred Stock pending Final Court Approval (less the total amount awarded as fees and expenses to Plaintiff's counsel by the Court), upon which election (i) Ahold shall be deemed to have waived on behalf of all parties any requirement under this Settlement of obtaining Final Court Approval prior to closing the Transaction (or the Alternative Transaction, if applicable), and (ii) SMG-II shall be required to obtain the necessary stockholder approval no later than ten (10) business days after notice of such election by Ahold. Upon such election, Ahold will revise the Tender Offer and proceed accordingly. Ahold's election to proceed with the Tender Offer prior to obtaining Final Court Approval shall -6- not prejudice or affect Ahold's right to proceed with the Alternative Transaction if the Minimum Condition is not satisfied. If Ahold makes such election but Final Court Approval ultimately is not obtained, the Escrow Amount, (i) if the Tender Offer closes, shall remain in escrow and be available for satisfaction of an adverse judgment against Defendants, if any, or (ii) if the Alternative Transaction closes, shall be released to PTK. In the event that neither Final Court Approval nor an Adverse Determination has been received prior to April 1, 2000 (whether or not the Minimum Condition has been satisfied), and Ahold does not make the election described above, then the Tender Offer shall remain open until the New Drop Dead Date (it being understood that Ahold shall not waive the condition of Final Court Approval without the approval of SMG-II, which SMG-II may withhold in its sole discretion) and, if Final Court Approval is not obtained prior to the New Drop Dead Date (whether or not the Minimum Condition has been satisfied), the SMG-II Merger Agreement and the Alternative Stock Purchase Agreement shall terminate with the effect set forth therein. In the event Ahold makes such election to waive for all parties any requirement or condition of Final Court Approval prior to closing the Transaction or the Alternative Transaction, each party to the SMG-II Merger Agreement and the Alternative Stock Purchase Agreement shall sign amendments or such additional -7- instruments and agreements necessary to give effect to such election. In the event that an Adverse Determination is received at any time before termination or closing of the Tender Offer, then the parties shall proceed with the Transaction and the Alternative Transaction on the terms set forth in the original SMG-II Merger Agreement or original Alternative Stock Purchase Agreement; provided, however, that if Ahold has made the election described in the preceding paragraph and subsequent to such election, but prior to the closing of the Tender Offer or the Alternative Transaction, an Adverse Determination is received, then the parties shall proceed with the Transaction or Alternative Transaction on the terms set forth in the original SMG-II Merger Agreement and original Alternative Stock Purchase Agreement only if SMG-II provides notice to Ahold by April 1, 2000 of its election to proceed on those terms. Except as expressly set forth in this paragraph 1(a), none of the rights or obligations of the parties set forth in the SMG-II Merger Agreement, the Alternative Stock Purchase Agreement, and related documents shall in any way be changed, modified, abridged or amended, including, without limitation, Ahold's right to proceed with the Alternative Transaction under the terms of the SMG-II Merger Agreement and the Alternative Stock Purchase Agreement. It is the intention of the parties -8- that Ahold's participation in this Settlement is primarily to accommodate the reallocation of the consideration it is offering between the various classes of securities which make up the capital structure of SMG. (b) Regardless of whether SMG is legally required to do so, SMG agrees that it will amend the Schedule 14D-9 dated March 15, 1999 to provide supplemental disclosures. The parties shall use their reasonable best efforts to agree upon the substance of the supplemental disclosures. (c) Reasonably promptly following the execution of this Memorandum of Understanding by the parties, Defendants shall publicly disclose the terms of the proposed Settlement set forth herein in a manner deemed reasonable by Defendants, with prior notice to Plaintiff's counsel. 2. Stipulation of Settlement. The parties to the Action will attempt in good faith to agree upon and execute an appropriate Stipulation of Settlement (the "Stipulation") and such other documentation as may be required in order to obtain Final Court Approval of the Settlement and the dismissal of the Action upon the terms set forth in this Memorandum of Understanding (collectively, the "Settlement Documents"). The Stipulation will expressly provide, inter alia, that: (a) Plaintiff will petition the Court for certification of a non-opt out settlement class pursuant to -9- Delaware Court of Chancery Rules 23(b)(1) and (b)(2) of all record and beneficial owners of SMG Preferred Stock from and including March 9, 1999 through and including the consummation of the Transaction, or, if the Transaction fails to close, the Alternative Transaction, including their successors in interest, predecessors, legal representatives, trustees, heirs, assigns or transferees, immediate and remote (the "Class"); (b) Plaintiff will petition the Court for entry of a judgment dismissing the Action "with prejudice"; (c) Plaintiff will petition the Court for a complete and final compromise, settlement, discharge and release of all claims, demands, rights, actions, causes of action, liabilities, damages, losses, obligations, judgments, suits, matters and issues of any kind or nature whatsoever, whether known or unknown, contingent or absolute, suspected or unsuspected, disclosed or undisclosed, hidden or concealed, matured or unmatured, arising under federal, state or any other law, that have been, could have been, or in the future can or might be asserted in the Action or in any court, tribunal or proceeding by or on behalf of any member of the Class (the "Releasing Parties"), whether individual, class, derivative, representative, legal, equitable or any other type or in any other capacity, against Defendants or any of their families, parent entities, affiliates, subsidiaries, predecessors, -10- successors or assigns, and each and all of their respective past, present or future officers, directors, associates, stockholders, controlling persons, representatives, employees, attorneys, financial or investment advisors, consultants, accountants, investment bankers, commercial bankers, engineers, advisors, insurers or agents, heirs, executors, trustees, general or limited partners or partnerships, personal representatives, estates or administrators, predecessors, successors and assigns (collectively, the "Released Persons"), which have arisen, could have arisen, or will arise out of, or which are related in any manner to, the allegations, facts, events, transactions, acts, occurrences, statements, representations, misrepresentations, omissions or any other matter, set forth or otherwise related, directly or indirectly, to the complaint filed in the Action, the Transaction, the Alternative Transaction, public filings or statements by Defendants or their representatives in connection with the Transaction or the Alternative Transaction, or any other actions of the Defendants relating in any way to the Transaction or the Alternative Transaction (collectively, the "Settled Claims"); provided, however, that the Settled Claims shall not include (i) any claims for appraisal pursuant to 8 Del. C. ss.262 of the Delaware General Corporation Law, or (ii) the right of any members of the -11- Class, Releasing Parties or Released Persons to enforce the terms of the Settlement; (d) that Defendants have denied and continue to deny that they have committed or attempted to commit any violations of law or breaches of duty of any kind; that Defendants are entering into the Stipulation solely because the proposed Settlement as described above would eliminate the burden, risk and expense of further litigation, and is in the best interests of SMG and all of its shareholders; and (e) that any of the Defendants shall have the right to withdraw from the proposed Settlement in the event that (i) any claims related to the Transaction, the Alternative Transaction, or the subject matter of the Action (whether direct, derivative or otherwise) are commenced by any member of the Class against any Released Persons in any court prior to Final Court Approval of the Settlement, and the court in which such claims are pending denies Defendants' application to dismiss or stay such action in contemplation of dismissal or (ii) any of the additional conditions set forth in paragraph 4 below shall not have been satisfied. The parties agree to use their best efforts to obtain the dismissal or stay in contemplation of dismissal of any action covered by clause (i) in the foregoing sentence on the terms set forth herein and further agree that the Defendants shall have the right to -12- withdraw from this Memorandum of Understanding if such efforts do not result in the dismissal or stay in contemplation of dismissal of such an action. 3. Notice and Court Approval. Subject to prior Court approval of the Stipulation and the form of the Settlement Documents, the parties to the respective Action will present the Settlement Documents to the Delaware Court of Chancery for approval as soon as practicable following appropriate notice of the proposed Settlement to the SMG shareholders as to all claims asserted in the Action by the named Plaintiff and the holders of SMG's Preferred Stock on whose behalf the Action was brought, without costs to any party except as provided herein. SMG shall pay the costs and expenses related to providing notice of the Settlement to the SMG shareholders. As used herein, "Final Court Approval" of the Settlement means that the Delaware Court of Chancery has entered an order approving the Settlement and awarding Plaintiff's attorneys' fees and expenses and that such order is finally affirmed, without modification of any substantive right of any party hereto, on appeal or is no longer subject to appeal and the time for any petition for reargument, appeal or review, by certiorari or otherwise, has expired, provided that any modification of the order approving the Settlement with respect to the amount of attorneys' fees and expenses awarded and/or any additional supplemental disclosure -13- required shall not be considered a modification of a substantive right affecting Final Court Approval. Plaintiff's counsel intend to apply to the Delaware Court of Chancery for an award of attorneys' fees and reasonable out-of-pocket disbursements. Subject to the terms and conditions of this Memorandum of Understanding and the contemplated Stipulation of Settlement, Plaintiff's counsel will apply for a total award of attorneys' fees and expenses in an amount not exceeding $1,956,268.40, which amount shall be payable only out of the amount made available in order to increase in the Tender Offer price as set forth in paragraph 1(a) above, only after Final Court Approval, and only if the Tender Offer at the New Per Share Amount closes. The Defendants and other releasees will not oppose the foregoing application, but reserve their rights to object to any other or different application for attorneys' fees and expenses. In the event the Tender Offer at the New Per Share Amount does not close, but the Alternative Transaction does, the Released Persons shall continue to enjoy all of the benefits of the Settlement, including the release contemplated thereby, and Plaintiff's counsel reserves their right to petition the Court of Chancery for an award of attorneys' fees and expenses, and Defendants reserve their rights to oppose any such petition; provided, however, that any such award of attorneys' fees and expenses approved by the Court shall be payable solely by PTK -14- (at the direction of SMG) upon Final Court Approval and closing of the Alternative Transaction. 4. Other Conditions. The consummation of the Settlement is subject to: (a) the drafting and execution of the Settlement Documents and the other agreements necessary to effectuate the terms of the proposed Settlement; (b) Final Court Approval of the Settlement; (c) dismissal of the Action by the Court with prejudice and without awarding fees or costs to any party, except as provided herein; and (d) Ahold closing the Tender Offer and the SMG-II Merger, or the Alternative Transaction. In the event that the Settlement is not consummated, this Memorandum of Understanding shall not be deemed to prejudice in any way the positions of the parties with respect to the Action, shall be subject to Rule 408 of the Delaware Rules of Evidence, and shall not entitle any party to recover any costs or expenses incurred in connection with the implementation of this Memorandum of Understanding. 5. Interim Stay of the Action. The parties to the Action agree that except as expressly provided herein, the Action shall be stayed pending submission of the proposed Settlement to the Court for its consideration. 6. Miscellaneous. (a) This Memorandum of Understanding may be executed in counterparts by any of the signatories hereto and as so executed shall constitute one -15- agreement; (b) this Memorandum of Understanding and the Settlement contemplated by it shall be governed by and construed in accordance with the laws of the State of Delaware without regard to that State's rules concerning conflict of laws; (c) this Memorandum of Understanding shall be binding upon and inure to the benefit of the parties and their respective agents, executors, heirs, successors and assigns, subject to the conditions set forth herein; (d) Plaintiff and his counsel represent and warrant that none of the claims or causes of action asserted in the Action have been assigned, encumbered or in any manner transferred, in whole or in part; (e) except as provided herein, the Defendants in the Action shall bear no expenses, costs, damages or fees alleged or incurred by the Plaintiff, any member of the Class or their respective attorneys, experts, advisors, agents or representatives; and (f) the provisions contained in this Memorandum of Understanding shall not be deemed a presumption, concession or admission by any Defendant in the Action of any breach of duty, liability, default or wrongdoing as to any facts or claims alleged or asserted in the Action, or in any other actions or proceedings, and shall not be interpreted, construed, deemed, invoked, offered or received in evidence or otherwise used by any person in the Action or in any other action or proceeding of any nature whatsoever. -16- PRICKETT, JONES, ELLIOTT & KRISTOL /s/ Thomas A. Mullen ---------------------------------- April Caso Ishak Ronald A. Brown, Jr. Thomas A. Mullen 1310 King Street P.O. Box 1328 Wilmington, DE 19899 (302) 888-6500 Attorneys for Plaintiff Elliot Wolfson MORRIS, NICHOLS, ARSHT & TUNNELL /s/ William M. Lafferty ---------------------------------- Martin P. Tully William M. Lafferty Christopher F. Carlton 1201 N. Market Street P.O. Box 1347 Wilmington, DE 19899-1347 (302) 658-9200 Attorneys for the SMG Defendants OF COUNSEL: SHEARMAN & STERLING 599 Lexington Avenue New York, NY 10022 (212) 848-4000 RICHARDS, LAYTON & FINGER, P.A. /s/ Gregory V. Varallo ---------------------------------- Gregory V. Varallo Kelly A. Herring One Rodney Square P.O. Box 551 Wilmington, DE 19899 -17- (302) 658-6541 Attorneys for Defendant Ahold Acquisition, Inc. OF COUNSEL: WHITE & CASE LLP 1155 Avenue of the Americas New York, NY 10036 (212) 819-8200 -18- -----END PRIVACY-ENHANCED MESSAGE-----