-----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, PShKe1CfJ2rLFfdWlCkyw3m1piyp7o4ji/Yz2EXQQo7wOy9o37eljZpMcDs+WrCj uh+bXk94sWHm4ssR5qtO5w== 0000950123-96-004940.txt : 19960911 0000950123-96-004940.hdr.sgml : 19960911 ACCESSION NUMBER: 0000950123-96-004940 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19960910 SROS: NONE GROUP MEMBERS: RDS ACQUISITION INC. GROUP MEMBERS: REVCO D S INC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BIG B INC CENTRAL INDEX KEY: 0000352720 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DRUG STORES AND PROPRIETARY STORES [5912] IRS NUMBER: 630632551 STATE OF INCORPORATION: AL FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-34305 FILM NUMBER: 96628033 BUSINESS ADDRESS: STREET 1: 2600 MORGAN ROAD S E CITY: BIRMINGHAM STATE: AL ZIP: 35023 BUSINESS PHONE: 2054243421 MAIL ADDRESS: STREET 1: P O BOX 10168 CITY: BIRMINGHAM STATE: AL ZIP: 35202 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BIG B INC CENTRAL INDEX KEY: 0000352720 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DRUG STORES AND PROPRIETARY STORES [5912] IRS NUMBER: 630632551 STATE OF INCORPORATION: AL FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: 1934 Act SEC FILE NUMBER: 005-34305 FILM NUMBER: 96628034 BUSINESS ADDRESS: STREET 1: 2600 MORGAN ROAD S E CITY: BIRMINGHAM STATE: AL ZIP: 35023 BUSINESS PHONE: 2054243421 MAIL ADDRESS: STREET 1: P O BOX 10168 CITY: BIRMINGHAM STATE: AL ZIP: 35202 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: REVCO D S INC CENTRAL INDEX KEY: 0000083496 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DRUG STORES AND PROPRIETARY STORES [5912] IRS NUMBER: 341527876 STATE OF INCORPORATION: DE FISCAL YEAR END: 0602 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 1925 ENTERPRISE PKWY CITY: TWINSBURG STATE: OH ZIP: 44087 BUSINESS PHONE: 2164259811 MAIL ADDRESS: STREET 1: 1925 ENTERPRISE PKWY CITY: TWINSBURG STATE: OH ZIP: 44087 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: REVCO D S INC CENTRAL INDEX KEY: 0000083496 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DRUG STORES AND PROPRIETARY STORES [5912] IRS NUMBER: 341527876 STATE OF INCORPORATION: DE FISCAL YEAR END: 0602 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 1925 ENTERPRISE PKWY CITY: TWINSBURG STATE: OH ZIP: 44087 BUSINESS PHONE: 2164259811 MAIL ADDRESS: STREET 1: 1925 ENTERPRISE PKWY CITY: TWINSBURG STATE: OH ZIP: 44087 SC 14D1 1 BIG B, INC. 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 and Statement on SCHEDULE 13D Under the Securities Exchange Act of 1934 ------------------------------------ BIG B, INC. (Name of Subject Company) ------------------------------------ RDS ACQUISITION INC. REVCO D.S., INC. (Bidders) ------------------------------------ COMMON STOCK, PAR VALUE $0.001 PER SHARE (Title of Class of Securities) 0888917106 (CUSIP Number of Class of Securities) ------------------------------------ JACK A. STAPH, ESQ. SENIOR VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL REVCO D.S., INC. 1925 ENTERPRISE PARKWAY TWINSBURG, OH 44087 (216) 487-1667 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Bidders) ------------------------------------ COPY TO: RICHARD HALL, ESQ. CRAVATH, SWAINE & MOORE WORLDWIDE PLAZA 825 EIGHTH AVENUE NEW YORK, NEW YORK 10019-7475 (212) 474-1293 CALCULATION OF FILING FEE* - -------------------------------------------------------------------------------- TRANSACTION VALUATION* AMOUNT OF FILING FEE - -------------------------------------------------------------------------------- $330,154,650 $66,031 - --------------------------------------------------------------------------------
* For purposes of calculating amount of filing fee only. The amount assumes the purchase of 22,010,310 shares of Common Stock, par value $0.001 per share, which represents all the shares of Common Stock outstanding as of May 11, 1996 according to the Subject Company's Quarterly Report on Form 10-Q for the quarter ended May 11, 1996, plus the number of shares of Common Stock currently issuable upon the exercise of all options to purchase Common Stock and upon conversion of Big B, Inc.'s 6.5% Convertible Subordinated Debentures Due 2003 according to the Subject Company's Annual Report on Form 10-K for the year ended February, 3 1996. / / 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: N/A Filing Party: N/A Form of Registration No.: N/A Date Filed: N/A - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 14D-1 AND 13D CUSIP No. 0888917106 - ---------------------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS: S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: RDS Acquisition Inc. (34-1838790) - ---------------------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) / / (b) / / - ---------------------------------------------------------------------------------------------- 3. SEC USE ONLY: - ---------------------------------------------------------------------------------------------- 4. SOURCES OF FUNDS: AF - ---------------------------------------------------------------------------------------------- 5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f). /X/ - ---------------------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - ---------------------------------------------------------------------------------------------- 7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 1,190,000 - ---------------------------------------------------------------------------------------------- 8. CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES: / / - ---------------------------------------------------------------------------------------------- 9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) Approximately 6.4% of the Shares Outstanding as of September 9, 1996. - ---------------------------------------------------------------------------------------------- 10. TYPE OF REPORTING PERSON: CO - ----------------------------------------------------------------------------------------------
3 14D-1 AND 13D CUSIP No. 0888917106 - ---------------------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS: S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: Revco D. S., Inc. (34-1527876) - ---------------------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) / / (b) / / - ---------------------------------------------------------------------------------------------- 3. SEC USE ONLY: - ---------------------------------------------------------------------------------------------- 4. SOURCES OF FUNDS: BK, WC, OO - ---------------------------------------------------------------------------------------------- 5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f). /X/ - ---------------------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - ---------------------------------------------------------------------------------------------- 7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 1,190,000 - ---------------------------------------------------------------------------------------------- 8. CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES: / / - ---------------------------------------------------------------------------------------------- 9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) Approximately 6.4% of the Shares Outstanding as of September 9, 1996. - ---------------------------------------------------------------------------------------------- 10. TYPE OF REPORTING PERSON: CO, HC - ----------------------------------------------------------------------------------------------
4 ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is Big B, Inc., an Alabama corporation (the "Company"), which has its principal executive offices at 2600 Morgan Road, S.E., Bessemer, AL 35023. (b) This Tender Offer Statement on Schedule 14D-1 and Statement on Schedule 13D relates to the offer by RDS Acquisition Inc., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Revco D.S., Inc., a Delaware corporation ("Parent"), to purchase all outstanding shares of Common Stock, par value $0.001 per share (the "Shares"), of the Company at a price of $15 per Share (the "Offer Price"), net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated September 10, 1996 (the "Offer to Purchase") and in the related Letter of Transmittal (which, together with any amendments and supplements thereto, collectively constitute the "Offer"), copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively. Information concerning the number of outstanding Shares is set forth in "Introduction" of the Offer to Purchase and is incorporated herein by reference. (c) Information concerning the principal markets in which the Shares are traded, and the high and low sales prices of the Shares for each quarterly period during the past two years is set forth in Section 6 ("Price Range of the Shares; Dividends on the Shares") of the Offer to Purchase and is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. This Schedule 14D-1 is being filed by the Purchaser along with a Schedule 13D filed by the Purchaser and Parent. Information concerning the principal business and principal offices of the Purchaser and Parent is set forth in Section 9 ("Certain Information Concerning the Purchaser and Parent") of the Offer to Purchase and is incorporated herein by reference. The names, business addresses, present principal occupations or employment, material occupation, positions, offices or employment during the last five years are set forth in Schedule I to the Offer to Purchase and are incorporated herein by reference. (e) and (f) The information set forth in Section 9 ("Certain Information Concerning the Purchaser and Parent") and Section 15 ("Certain Legal Matters") of the Offer to Purchase is incorporated herein by reference. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a) The information set forth in Section 11 ("Contacts and Transactions with the Company; Background of the Offer") and Section 12 ("Purpose of the Offer; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. (b) The information set forth in Section 11 ("Contacts and Transactions with the Company; Background of the Offer") and Section 12 ("Purpose of the Offer; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a) and (b) The information set forth in Section 10 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a)-(e) The information set forth in Section 12 ("Purpose of the Offer; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. 1 5 (f) and (g) The information set forth in Section 7 ("Effect of the Offer on the Market for the Shares; Stock Quotation; Exchange Act Registration; Effect of the Offer on the Convertible Debentures; Margin Regulations") of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) and (b) The information set forth in "Introduction", Section 9 ("Certain Information Concerning the Purchaser and Parent"), Section 11 ("Contacts and Transactions with the Company; Background of the Offer"), Section 12 ("Purpose of the Offer; Plans for the Company") of, and Schedule II to, 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 "Introduction", Section 9 ("Certain Information Concerning the Purchaser and Parent"), Section 11 ("Contacts and Transactions with the Company; Background of the Offer") and Section 12 ("Purpose of the Offer; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in "Introduction" and 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 "Introduction", Section 9 ("Certain Information Concerning the Purchaser and Parent") of the Offer to Purchase is incorporated herein by reference. ITEM 10. ADDITIONAL INFORMATION. (a) The information set forth in Section 12 ("Purpose of the Offer; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. (b) and (c) The information set forth in Section 15 ("Certain Legal Matters") of the Offer to Purchase is incorporated hereby by reference. (d) The information set forth in Section 7 ("Effect of the Offer on the Market for the Shares; Stock Quotation; Exchange Act Registration; Effect of the Offer on the Convertible Debentures; Margin Regulations") of the Offer to Purchase is incorporated herein by reference. (e) None. (f) The information set forth in the Offer to Purchase and the Letter of Transmittal is incorporated herein by reference. 2 6 ITEM 11. MATERIALS TO BE FILED AS EXHIBITS. (a)(1) Offer to Purchase. (a)(2) Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (a)(4) Letter to Brokers, Dealers, Banks, Trust Companies and Other Nominees. (a)(5) Letter to Clients for Use by Brokers, Dealers, Banks, Trust Companies and Other Nominees. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Form of Summary Advertisement (a)(8) Text of Press Release dated September 9, 1996. (b) None. (c) Amended and Restated Credit Agreement dated as of July 27, 1995, among Parent, Banque Paribas and Bank of Illinois, as managing agents, Bank of America National Trust and Savings Association, as administrative agent, and the syndicate of lenders thereto. (d) None. (e) Not applicable. (f) None.
3 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: September 10, 1996 REVCO D.S., INC., by /s/ Jack A. Staph ---------------------------------- Name: Jack A. Staph Title: Senior Vice President, Secretary and General Counsel RDS ACQUISITION INC., by /s/ Jack A. Staph ---------------------------------- Name: Jack A. Staph Title: Vice President and Secretary 4 8 EXHIBIT INDEX
PAGINATION BY SEQUENTIAL EXHIBIT EXHIBIT NUMBERING NUMBER DESCRIPTION SYSTEM ------- ------------------------------------------------------------------- ---------- (a)(1) Offer to Purchase. ................................................ (a)(2) Letter of Transmittal. ............................................ (a)(3) Notice of Guaranteed Delivery. .................................... (a)(4) Letter to Brokers, Dealers, Banks, Trust Companies and Other Nominees. ......................................................... (a)(5) Letter to Clients for Use by Brokers, Dealers, Banks, Trust Companies and Other Nominees. ..................................... (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. .............................................. (a)(7) Form of Summary Advertisement...................................... (a)(8) Text of Press Release dated September 9, 1996. .................... (b) None. ............................................................. (c) Amended and Restated Credit Agreement dated as of July 27, 1995, among Parent, Banque Paribas and Bank of Illinois, as managing agents, Bank of America National Trust and Savings Association, as administration agent, and the syndicate of lenders thereto. ....... (d) None. ............................................................. (e) Not applicable. ................................................... (f) None. .............................................................
EX-99.A1 2 OFFER TO PURCHASE 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF BIG B, INC. AT $15 NET PER SHARE BY RDS ACQUISITION INC., a Wholly Owned Subsidiary of REVCO D.S., INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, OCTOBER 7, 1996, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE THAT NUMBER OF SHARES OF COMMON STOCK (THE "SHARES") OF BIG B, INC. (THE "COMPANY") THAT, TOGETHER WITH THE 1,190,000 SHARES ALREADY OWNED BY THE PURCHASER, WOULD REPRESENT A MAJORITY OF ALL OUTSTANDING SHARES ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE (THE "MINIMUM TENDER CONDITION"). THE OFFER IS ALSO SUBJECT TO OTHER CONDITIONS. SEE THE INTRODUCTION AND SECTIONS 1 AND 14. IMPORTANT Any stockholder desiring to tender all or any portion of such stockholder's Shares should either (i) complete and sign the Letter of Transmittal (or a copy thereof) in accordance with the instructions in the Letter of Transmittal, have such stockholder's signature thereon guaranteed if required by Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of Transmittal (or such copy), or, in the case of a book-entry transfer effected pursuant to the procedures set forth in Section 2, an Agent's Message (as defined herein), and any other required documents to the Depositary and either deliver the certificates for such Shares to the Depositary along with the Letter of Transmittal (or such copy) or deliver such Shares pursuant to the procedures for book-entry transfer set forth in Section 2 or (ii) request such stockholder's broker, dealer, bank, trust company or other nominee to effect the transaction for such stockholder. A stockholder having Shares registered in the name of a broker, dealer, bank, trust company or other nominee must contact such broker, dealer, bank, trust company or other nominee if such stockholder desires to tender such Shares. If a stockholder desires to tender Shares and such stockholder's certificates for Shares are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis, or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such stockholder's tender of Shares may be effected by following the procedures for guaranteed delivery set forth in Section 2. Questions and requests for assistance may be directed to Salomon Brothers Inc, the Dealer Manager, or to D.F. King & Co., Inc., the Information Agent, 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, the Notice of Guaranteed Delivery and all other tender offer materials may be obtained from the Information Agent or the Dealer Manager or from brokers, dealers, commercial banks and trust companies, and will be furnished promptly at the Purchaser's expense. ------------------------ The Dealer Manager for the Offer is: SALOMON BROTHERS INC ------------------------ September 10, 1996 2 TABLE OF CONTENTS Introduction......................................................................... 1 The Tender Offer..................................................................... 2 1. Terms of the Offer.......................................................... 2 2. Procedures for Tendering Shares............................................. 4 3. Withdrawal Rights........................................................... 7 4. Acceptance for Payment and Payment.......................................... 8 5. Certain Federal Income Tax Consequences..................................... 9 6. Price Range of the Shares; Dividends on the Shares.......................... 10 7. Effect of the Offer on the Market for the Shares; Stock Quotation; Exchange Act Registration; Effect of the Offer on the Convertible Debentures; Margin Regulations.......................... 10 8. Certain Information Concerning the Company.................................. 12 9. Certain Information Concerning the Purchaser and Parent..................... 14 10. Source and Amount of Funds.................................................. 16 11. Contacts and Transactions with the Company; Background of the Offer......... 17 12. Purpose of the Offer; Plans for the Company................................. 20 13. Dividends and Distributions................................................. 23 14. Certain Conditions of the Offer............................................. 24 15. Certain Legal Matters....................................................... 27 16. Fees and Expenses........................................................... 29 17. Miscellaneous............................................................... 30
Schedule I: Directors and Executive Officers of Parent and the Purchaser Schedule II: Recent Share Purchases by the Purchaser i 3 TO THE HOLDERS OF COMMON STOCK OF BIG B, INC.: INTRODUCTION RDS Acquisition Inc., a Delaware corporation (the "Purchaser"), which is a wholly owned subsidiary of Revco D.S., Inc., a Delaware corporation ("Parent"), hereby offers to purchase all outstanding shares of Common Stock, par value $.001 per share (the "Shares"), of Big B, Inc., an Alabama corporation (the "Company"), at a price of $15 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, together with any amendments or supplements from time to time hereto or thereto, collectively constitute the "Offer"). The purpose of the Offer is to enable Parent to acquire control of, and the entire equity interest in, the Company. The Offer, as the first step in the acquisition of the Company, is intended to facilitate the acquisition of all the Shares. Parent currently intends, as soon as practicable following consummation of the Offer, to act to have its nominees elected to the Company's board of directors to replace the Company's current board and to propose and seek to have the Company consummate a merger or similar business combination with the Purchaser or another direct or indirect wholly owned subsidiary of Parent (the "Proposed Merger"). The purpose of the Proposed Merger is to acquire all Shares not tendered and purchased pursuant to the Offer or otherwise. Pursuant to the Proposed Merger, each then outstanding Share (other than Shares owned by the Purchaser, Parent or any of their subsidiaries, Shares held in the treasury of the Company and Shares owned by stockholders who perfect any available dissenters' rights under the Alabama Business Corporation Act (the "ABCA")) will be converted into the right to receive an amount in cash equal to the price per Share paid pursuant to the Offer. In order to approve the Proposed Merger without the affirmative vote of any other stockholders of the Company, the Purchaser would need to own 66-2/3% of the outstanding Shares on the record date set for the meeting of stockholders to approve the Proposed Merger, unless the Company's articles of incorporation are amended to provide for a lesser amount (which may not be less than a majority of the outstanding Shares). See Sections 1, 12 and 14. If the Purchaser obtains 80% of the outstanding Shares, the Purchaser will be able to merge the Company into the Purchaser without the need to conduct a meeting of stockholders. See Section 12. Parent intends to seek to negotiate with the Company with respect to the acquisition of the Company by Parent. If such negotiations result in a definitive merger agreement between the Company and Parent, the consideration to be received by holders of Shares could include or consist of securities, cash or any combination thereof. Accordingly, such negotiations could result in, among other things (a) termination of the Offer (see Section 14) and submission of a different acquisition proposal to the Company's stockholders for their approval or (b) amendment of the Offer (see Section 1). Certain Federal income tax consequences of the sale of Shares pursuant to the Offer are described in Section 5. THE OFFER IS CONDITIONED UPON THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION 1) THAT NUMBER OF SHARES (THE "MINIMUM NUMBER OF SHARES") THAT, TOGETHER WITH THE 1,190,000 SHARES ALREADY OWNED BY THE PURCHASER, WOULD REPRESENT A MAJORITY OF ALL OUTSTANDING SHARES ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE (THE "MINIMUM TENDER CONDITION"). THE PURCHASER RESERVES THE RIGHT, SUBJECT TO THE APPLICABLE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"), TO WAIVE OR REDUCE THE MINIMUM TENDER CONDITION AND TO ELECT TO PURCHASE, PURSUANT TO THE OFFER, FEWER THAN THE MINIMUM NUMBER OF SHARES. SEE SECTIONS 1 AND 14. According to the Company's Quarterly Report on Form 10-Q for the quarter ended May 11, 1996 (the "Company 10-Q"), as of May 11, 1996 filed with the Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), there were 18,592,130 Shares issued and outstanding. According to the Company's Annual Report on Form 10-K for the fiscal year ended 1 4 February 3, 1996 (the "Company 10-K") filed with the Commission under the Exchange Act, as of February 3, 1996, there were 119,000 Shares subject to outstanding options. The Company's 6.5% Convertible Subordinated Debentures Due 2003 (the "Convertible Debentures") are currently convertible into Shares at a price of $12.20 per Share, which represents 81.9672 Shares per $1,000 aggregate principal amount and an aggregate of 3,299,180 Shares, subject to adjustment. Based on the foregoing and assuming that no options were granted after February 3, 1996, and no options were exercised or expired from February 4, 1996 through September 10, 1996, there would be 22,010,310 Shares outstanding on a fully diluted basis. As of September 10, 1996, the Purchaser owned 1,190,000 Shares, which means that the number of additional Shares needed to satisfy the Minimum Tender Condition would be 9,815,155 Shares. However, the actual Minimum Number of Shares will depend on the facts as they exist on the date of purchase. Other conditions to the Offer are described in Section 14. The Purchaser reserves the right (but shall not be obligated), subject to the applicable rules and regulations of the Commission, to waive any of or all such conditions. See Sections 1, 8, 14 and 15. The Purchaser is not offering to purchase the Convertible Debentures. However, in lieu of converting the Convertible Debentures in order to tender Shares, holders of Convertible Debentures may deliver certificates for Convertible Debentures that are convertible into the number of Shares being tendered. See Section 2. 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, transfer taxes on the purchase of Shares pursuant to the Offer. The Purchaser will pay all fees and expenses of Salomon Brothers Inc ("Salomon Brothers"), which is acting as Dealer Manager (the "Dealer Manager"), ChaseMellon Shareholder Services, L.L.C., which is acting as the Depositary (the "Depositary"), and D.F. King & Co., Inc., which is acting as Information Agent (the "Information Agent"), incurred in connection with the Offer. See Section 16. 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 such extension or amendment), the Purchaser will promptly after the Expiration Date accept for payment and will pay for all Shares validly tendered prior to the Expiration Date and not properly withdrawn in accordance with Section 3. The term "Expiration Date" means 12:00 Midnight, New York City time, on Monday, October 7, 1996, unless and until the Purchaser, in its sole discretion, extends 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, expires. THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM TENDER CONDITION, THE EXPIRATION OR TERMINATION OF ALL WAITING PERIODS IMPOSED BY THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER (THE "HSR ACT"), AND THE SATISFACTION OF THE OTHER CONDITIONS SET FORTH IN SECTION 14. Subject to the applicable rules and regulations of the Commission, the Purchaser reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events or facts set forth in Section 14 shall have occurred, to (a) extend the period of time during which the Offer is open, and thereby delay acceptance for payment of and the payment for any Shares, by giving oral or written notice of such extension to the Depositary and (b) amend the Offer in any other respect by giving oral or written notice of such amendment to the Depositary. During any such extension, all Shares previously tendered and not properly withdrawn will remain subject to the Offer, subject to the right of a tendering shareholder to withdraw such stockholder's 2 5 Shares as provided in Section 3. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER PRICE FOR TENDERED SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN PAYMENT FOR TENDERED SHARES. If by the Expiration Date, any of or all the conditions to the Offer have not been satisfied or waived, the Purchaser reserves the right (but shall not be obligated), subject to the applicable rules and regulations of the Commission, to (a) terminate the Offer and not accept for payment or pay for any Shares and return all tendered Shares to tendering stockholders, (b) waive all the unsatisfied conditions and accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn, (c) extend the Offer and, subject to the right of stockholders to withdraw Shares until the Expiration Date, retain the Shares that have been tendered during the period or periods for which the Offer is extended or (d) amend the Offer. There can be no assurance that the Purchaser will exercise its right to extend the Offer. Any extension, amendment or termination will be followed as promptly as practicable by public announcement. In the case of an extension, Rule 14e-1(d) under the Exchange Act requires that the announcement be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with the public announcement requirements of Rule 14d-4(c) under the Exchange Act. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material change in the information published, sent or given to stockholders in connection with the Offer be promptly disseminated to stockholders in a manner reasonably designed to inform stockholders of such change), and without limiting the manner in which the Purchaser may choose to make any public announcement, the Purchaser will not have any obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to the Dow Jones News Service. As used in this Offer to Purchase, "business day" has the meaning set forth in Rule 14d-1 under the Exchange Act. If the Purchaser extends the Offer or is delayed in its acceptance for payment of or payment (whether before or after its acceptance for payment of Shares) for Shares or is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of the Purchaser, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to exercise withdrawal rights as set forth in Section 3. However, the ability of the Purchaser to delay the payment for Shares that the Purchaser has accepted for payment is limited by Rule 14e-1(c) under the Exchange Act, which requires that the Purchaser pay the consideration offered or return tendered Shares promptly after the termination or withdrawal of the Offer. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or waives a material condition of the Offer, the Purchaser will disseminate additional tender offer materials and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which the Offer must remain open following material changes in the terms of the Offer or information concerning the Offer, other than a change in price, a change in the percentage of securities sought or an amendment to or a waiver of the Minimum Tender Condition, will depend upon the facts and circumstances then existing, including the relative materiality of the changed terms or information. With respect to a change in price or a change in the percentage of securities sought, a minimum period of 10 business days, and with respect to any other amendment to the Minimum Tender Condition, a minimum period of five business days, is generally required to allow for adequate dissemination to stockholders and investor response. Requests are being made to the Company pursuant to Rule 14d-5 of the Exchange Act and Section 16.02 of the ABCA for the use of the Company's stockholder lists and security position listings 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, 3 6 and will be furnished to brokers, dealers, banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder lists, or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares, by the Purchaser following receipt of such lists or listings from the Company, or by the Company if it so elects. 2. PROCEDURES FOR TENDERING SHARES Valid Tender. For a stockholder validly to tender Shares pursuant to the Offer, (a) in the case of physical delivery of certificates for Shares, a properly completed and signed Letter of Transmittal (or copy thereof), together with any required signature guarantees 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 certificates for tendered Shares must be received by the Depositary at one of such addresses prior to the Expiration Date, (b) in the case of a book-entry transfer of Shares, an Agent's Message (as defined below) and a properly completed and signed Letter of Transmittal (or copy thereof), together with any required signature guarantees 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 or (c) the tendering stockholder must comply with the procedures for guaranteed delivery set forth below. The Depositary will establish accounts with respect to the Shares at The Depository Trust Company and the Philadelphia Depository Trust Company (the "Book-Entry Transfer Facilities") for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in any of the Book-Entry Transfer Facilities' systems may make book-entry delivery of Shares by causing a Book-Entry Transfer Facility to transfer such Shares into the Depositary's account in accordance with such Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility, the Letter of Transmittal (or copy thereof), properly completed and duly executed, with any required signature guarantees, and an Agent's Message, and any other required documents, must, in each case, be transmitted to, and 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, or the tendering stockholder must comply with the procedures for guaranteed delivery set forth below. The confirmation of a book-entry transfer of Shares into the Depositary's account at a Book-Entry Transfer Facility as described above is referred to herein as a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. The term "Agent's Message" means a message transmitted by a Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, that states that such Book-Entry Transfer Facility has received an express acknowledgement from the participant in such Book-Entry Transfer Facility tendering the Shares that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Purchaser may enforce such agreement against the participant. THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). 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. Signature Guarantees. A signature guarantee is not required on the Letter of Transmittal (a) if the Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this Section, includes any participant in any of the Book-Entry Transfer Facilities' systems whose name 4 7 appears on a security position listing as the owner of the Shares) of the Shares tendered therewith and such registered holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (b) if such Shares are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that 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"). In all other cases, all signatures on the Letter of Transmittal must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If certificates for tendered Shares are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made or certificates for Shares not tendered or not accepted for payment are to be returned to a person other than the registered holder of the certificates surrendered, the tendered certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holders or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's certificates for Shares are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such stockholder's tender may be effected if all the following conditions are met: (i) such 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, is received by the Depositary, as provided below, prior to the Expiration Date; and (iii) the certificates for all tendered Shares, in proper form for transfer (or a Book-Entry Confirmation with respect to all such Shares), together with a properly completed and duly signed Letter of Transmittal (or a copy thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents, are received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery. A "trading day" is any day on which the Nasdaq National Market (the "Nasdaq National Market") operated by the National Association of Securities Dealers, Inc. (the "NASD") is open for business. The Notice of Guaranteed Delivery may be delivered by hand to the Depositary or transmitted by fax or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (a) certificates for (or a timely Book-Entry Confirmation with respect to) such Shares, (b) a Letter of Transmittal (or a copy thereof), properly completed and duly signed, with any required signature guarantees, and, in the case of a book-entry transfer, an Agent's Message, and (c) any other required documents. Accordingly, tendering stockholders may be paid at different times depending upon when such documents are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT FOR TENDERED SHARES. THE VALID TENDER OF SHARES PURSUANT TO ONE OF THE PROCEDURES DESCRIBED ABOVE WILL CONSTITUTE A BINDING AGREEMENT BETWEEN THE TENDERING STOCKHOLDER AND THE PURCHASER UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF THE OFFER. 5 8 Appointment as Attorneys-in-Fact and Proxies. By executing a Letter of Transmittal as set forth above, the tendering stockholder will irrevocably appoint designees of the Purchaser as such stockholder's attorneys-in-fact and proxies in the manner set forth in the Letter of Transmittal, 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 with respect to any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after September 10, 1996. All such proxies will be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, the Purchaser accepts for payment Shares tendered by such stockholder as provided herein. Upon such appointment, all prior powers of attorney, proxies and consents given by such stockholder with respect to such Shares or other securities or rights will, without further action, be revoked and no subsequent powers of attorney, proxies, consents or revocations may be given (and, if given, will be deemed not effective). The designees of the Purchaser will thereby be empowered to exercise all voting and other rights with respect to such Shares and other securities or rights in respect of any annual, special or adjourned meeting of the Company's stockholders, actions by written consent in lieu of any such meeting or otherwise, as they in their sole discretion deem proper, including any of the foregoing held or executed in regard to an action to have the Purchaser's nominees elected to the Company's board of directors, to consummate the Proposed Merger and otherwise in connection with the transactions contemplated by the Proposed Merger. The Purchaser reserves the right to require that, in order for Shares 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, consent and other rights with respect to such Shares and other securities or rights, including voting at any meeting of stockholders. Tender of Shares by Holders of Convertible Debentures. Holders of Convertible Debentures who wish to tender Shares into which their Convertible Debentures are convertible may do so either (a) by first converting their Convertible Debentures and delivering to the Depositary certificates for Shares being tendered or (b) by delivering to the Depositary certificates for Convertible Debentures that are convertible into the Shares being tendered. In the case of (b), only the number of whole Shares into which the Convertible Debentures represented by the certificates so delivered are convertible may be tendered, and any cash in lieu of fractional Shares received upon conversion of such Convertible Debentures will be paid over to the holders of such Convertible Debentures or as provided in the Letter of Transmittal. Holders of Convertible Debentures who elect to tender Shares by delivering certificates for Convertible Debentures without first converting their Convertible Debentures will, by executing a Letter of Transmittal, in addition to the matters described under "Appointment as Attorneys-in-Fact and Proxies" above, irrevocably appoint the Depositary as such holder's agent and attorney-in-fact in the manner set forth in the Letter of Transmittal, with full power of substitution, to the full extent of such holder's rights, to convert the Convertible Debentures represented by the certificates so delivered into the Shares being tendered. Such appointment will be effective when, and only to the extent that, the Purchaser accepts for payment Shares tendered by a holder of Convertible Debentures in this manner. Certificates for Convertible Debentures delivered to the Depositary to tender Shares must be in proper form for conversion into the Shares being tendered. In the event certificates for Convertible Debentures are registered in a name other than the name of the tendering securityholder, or to the extent deemed necessary or appropriate by the Depositary or the Purchaser to convert such Convertible Debentures, additional documents may be required to transfer record ownership of the Convertible Debentures into the name of the tendering securityholder or the name of the Depositary. In any event, payment for Shares tendered by the delivery of certificates for Convertible Debentures that are accepted for payment pursuant to the Offer will only be made after the receipt by the Depositary of such Shares upon conversion of such Convertible Debentures. See Section 4. Determination of Validity. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of any tender of Shares will be determined by the Purchaser in its sole discretion, which determination will be final and binding. The Purchaser reserves the absolute right 6 9 to reject any or all tenders determined by it not to be in proper form or the acceptance for payment of or payment for which may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right to waive any defect or irregularity in the tender of any 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 or irregularities relating thereto have been cured or waived. None of the Purchaser, Parent, the Depositary, the Information Agent, the Dealer Manager or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. 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. Backup Withholding. In order to avoid "backup withholding" of Federal income tax on payments of cash pursuant to the Offer, a stockholder surrendering Shares in the Offer must, unless an exemption applies, provide the Depositary with such stockholder's correct taxpayer identification number ("TIN") on a Substitute Form W-9 and certify under penalties of perjury that such TIN is correct and that such stockholder is not subject to backup withholding. If a stockholder does not provide such stockholder's correct TIN or fails to provide the certifications described above, the Internal Revenue Service (the "IRS") may impose a penalty on such stockholder and payment of cash to such stockholder pursuant to the Offer may be subject to backup withholding of 31%. All stockholders surrendering Shares pursuant to the Offer should complete and sign the main signature form and the Substitute Form W-9 included as part of the Letter of Transmittal to provide the information and certification necessary to avoid backup withholding (unless an applicable exemption exists and is proved in a manner satisfactory to the Purchaser and the Depositary). Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Noncorporate foreign stockholders should complete and sign the main signature form and a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See Instruction 9 to the Letter of Transmittal. See Section 5. 3. WITHDRAWAL RIGHTS Except as otherwise provided in this Section 3, tenders of Shares pursuant to the Offer will be irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to the procedures set forth below at any time prior to the Expiration Date and, unless theretofore accepted for payment and paid for by the Purchaser pursuant to the Offer, may also be withdrawn at any time after November 8, 1996. For a withdrawal to be effective, a written or fax 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 and must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn (or in the case of holders tendering Shares by the delivery of certificates for Convertible Debentures, the name of the registered holder of the Convertible Debentures that are convertible into the Shares to be withdrawn), if different from the name of the person who tendered the Shares. If certificates for Shares (or Convertible Debentures) have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such certificates have been tendered by an Eligible Institution, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered pursuant to the procedures for book-entry transfer set forth in Section 2, any notice of withdrawal must also specify the name and number of the account at the appropriate Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered 7 10 for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 2 at any time prior to the Expiration Date. 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 the Purchaser, Parent, the Depositary, the Information Agent, the Dealer Manager 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. 4. ACCEPTANCE FOR PAYMENT AND PAYMENT 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 promptly after the Expiration Date accept for payment and will pay for all Shares validly tendered prior to the Expiration Date and not properly withdrawn in accordance with Section 3. All questions as to the satisfaction of such terms and conditions will be determined by the Purchaser in its sole discretion, which determination will be final and binding. See Sections 1 and 14. The Purchaser expressly reserves the right, in its sole discretion, to delay acceptance for payment of or payment for Shares in order to comply in whole or in part with any applicable law, including the HSR Act. Any such delays will be effected in compliance with Rule 14e-1(c) under the Exchange Act, which requires that the Purchaser pay the consideration offered or return tendered Shares promptly after the termination or withdrawal of the Offer. Parent filed a Notification and Report Form with respect to the Offer under the HSR Act on September 10, 1996. The waiting period under the HSR Act with respect to the Offer will expire at 11:59 p.m., New York City time, on September 25, 1996. However, the Antitrust Division of the Department of Justice (the "Antitrust Division") or the Federal Trade Commission (the "FTC") may extend the waiting period by requesting additional information or documentary material from Parent. If such a request is made, such waiting period will expire at 11:59 p.m., New York City time, on the 10th day after substantial compliance by Parent with such request. See Section 15 for additional information concerning the HSR Act and the applicability of the antitrust laws to the Offer. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after (i) timely receipt by the Depositary of (a) certificates for such Shares (or Convertible Debentures convertible into such Shares) (or a timely Book-Entry Confirmation with respect to such Shares), (b) a Letter of Transmittal (or a copy thereof), properly completed and duly signed, with any required signature guarantees, and, in the case of a book-entry transfer, an Agent's Message, and (c) any other required documents; and (ii) in the case of Shares tendered by delivery of certificates for Convertible Debentures, receipt by the Depositary of certificates for the Shares issuable upon conversion of such Convertible Debentures. The per Share consideration paid to any stockholder pursuant to the Offer will be the highest per Share consideration paid to any other stockholder pursuant to the Offer. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to the Purchaser and not withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance for payment of such Shares. Payment for Shares accepted for payment 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 payment from the Purchaser and transmitting payment to tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING PAYMENT FOR TENDERED SHARES. If the Purchaser extends the Offer or is delayed in its acceptance for payment of or payment (whether before or after its acceptance for payment of Shares) for Shares or is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to the 8 11 Purchaser's rights under the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act), the Depositary may retain tendered Shares on behalf of the Purchaser, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to exercise withdrawal rights as set forth in Section 3. If any tendered Shares are not purchased pursuant to the Offer for any reason, certificates for any such Shares (or in the case of holders of Convertible Debentures tendering Shares by delivery of Certificates for Convertible Debentures, certificates for such Convertible Debentures) will be returned, without expense to the tendering securityholder (or, in the case of Shares delivered by book-entry transfer, such Shares will be credited to an account maintained at the appropriate Book-Entry Transfer Facility), as promptly as practicable after the expiration or termination of the Offer. The Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to Parent, or to one or more direct or indirect wholly owned subsidiaries of Parent, the right to purchase Shares tendered pursuant to the Offer, but any such transfer or 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. CERTAIN FEDERAL INCOME TAX CONSEQUENCES The receipt of cash pursuant to the Offer or the Proposed Merger will be a taxable transaction for Federal income tax purposes under the Internal Revenue Code of 1986, as amended (the "Code"), and may also be a taxable transaction under applicable state, local or foreign income or other tax laws. Generally, for Federal income tax purposes, a tendering stockholder will recognize gain or loss equal to the difference between the amount of cash received by the stockholder pursuant to the Offer or the Proposed Merger and the aggregate tax basis in the Shares tendered by the stockholder and purchased pursuant to the Offer or converted in the Proposed Merger, as the case may be. Gain or loss will be calculated separately for each block of Shares tendered and purchased pursuant to the Offer or converted in the Proposed Merger, as the case may be. If Shares are held by a stockholder as capital assets, except as provided below, gain or loss recognized by the stockholder will be capital gain or loss, which will be long-term capital gain or loss if the stockholder's holding period for the Shares exceeds one year. Under current law, long-term capital gains recognized by an individual stockholder will generally be taxed at a maximum Federal marginal tax rate of 28%, and long-term capital gains recognized by a corporate stockholder will be taxed at a maximum Federal marginal tax rate of 35%. If a holder of Convertible Debentures converts such Debentures into Shares, the holder will recognize no gain or loss on the conversion, and the holder's tax basis and (assuming the Convertible Debentures were held as capital assets) holding period for the Convertible Debentures will carry over to the Shares. If the Shares are purchased pursuant to the Offer or converted into cash pursuant to the Proposed Merger, the tax results in the two preceding paragraphs will generally apply. However, if the holder's tax basis in the Convertible Debentures is less than their principal amount (such difference being "market discount"), then, subject to a de minimis rule, the untaxed market discount on the Convertible Debentures that had accrued at the time of their conversion into Shares will be taxable as ordinary income rather than capital gain upon any subsequent taxable disposition of the Shares, including when the Shares are purchased pursuant to the Offer or converted into cash pursuant to the Proposed Merger. A securityholder (other than certain exempt securityholders, including, among others, all corporations and certain foreign individuals and entities) that tenders Shares may be subject to 31% backup withholding unless such securityholder provides its TIN and certifies that such number is correct or properly certifies that it is awaiting a TIN, or unless an exemption applies. A securityholder that does not furnish its TIN may be subject to a penalty imposed by the IRS. See Section 2 ("Procedures For Tendering Shares--Backup Withholding"). 9 12 If backup withholding applies to a securityholder, the Depositary will be required to withhold 31% from payments to such securityholder. Backup withholding is not an additional tax. Rather, the amount of the backup withholding can be credited against the Federal income tax liability of the person subject to the backup withholding, provided that the required information is given to the IRS. If backup withholding results in an overpayment of tax, a refund can be obtained by the securityholder upon filing an income tax return. THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION OR WITH RESPECT TO HOLDERS OF SHARES WHO ARE SUBJECT TO SPECIAL TAX TREATMENT UNDER THE CODE, SUCH AS NON-U.S. PERSONS, LIFE INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS AND FINANCIAL INSTITUTIONS, AND MAY NOT APPLY TO A HOLDER OF SHARES IN LIGHT OF INDIVIDUAL CIRCUMSTANCES. HOLDERS OF SHARES AND CONVERTIBLE DEBENTURES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE OFFER AND THE PROPOSED MERGER. 6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES The Shares are included in the Nasdaq National Market and are traded under the symbol BIGB. The following table sets forth, for each of the periods indicated, the high and low sales quotations per Share as reported by the Nasdaq National Market and the Dow Jones News Retrieval Service and the dividends paid on the Shares as set forth in the Company 10-K and the Company 10-Q.
SALES QUOTATION ------------ FISCAL YEAR HIGH LOW DIVIDENDS - ------------------------------------------------------------------ ---- --- --------- 1995 Quarter ended May 7, 1994....................................... $ 12-1/2 $ 9-7/8 $0.04 Quarter ended July 30, 1994..................................... $ 12-1/8 $10-5/8 $0.04 Quarter ended October 22, 1994.................................. $ 12-1/8 $10-3/8 $0.04 Quarter ended January 28, 1995.................................. $ 14-1/2 $11-1/2 $0.04 1996 Quarter ended May 8, 1995....................................... $ 15-1/4 $13 $0.04 Quarter ended July 29, 1995..................................... $ 15-1/8 $13-3/4 $0.05 Quarter ended October 26, 1995.................................. $ 16-1/8 $14-1/4 $0.05 Quarter ended February 3, 1996.................................. $ 14-3/4 $ 7-1/2 $0.05 1997 Quarter ended May 11, 1996...................................... $ 11-7/8 $ 9-1/4 $0.05 Quarter ended August 3, 1996.................................... $ 11-1/2 $ 7-7/8 $0.05 Quarter ending October 19, 1996 (through September 6, 1996)..... $ 12-7/8 $ 9-7/8
On September 6, 1996, the last full trading day before the first public announcement of the Purchaser's intention to make the Offer, the last reported sale price of the Shares on the Nasdaq National Market was $12 5/8 per Share. On September 9, 1996, the last full trading day before the commencement of the Offer, the last reported sale price of the Shares on the Nasdaq National Market was $15 7/8 per Share. The average closing price for Shares for the 90-calendar day period ended September 6, 1996 was $9.81. Stockholders are urged to obtain current market quotations for the Shares. 7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION; EXCHANGE ACT REGISTRATION; EFFECT OF THE OFFER ON THE CONVERTIBLE DEBENTURES; MARGIN REGULATIONS Market for the Shares. The purchase of Shares pursuant to the Offer will reduce the number of holders of Shares and the number of Shares that might otherwise trade publicly and could adversely affect the liquidity and market value of the remaining Shares held by the public. 10 13 Stock Quotation. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of the NASD for continued inclusion in the Nasdaq National Market, which require that an issuer have at least 200,000 publicly held shares, held by at least 400 stockholders or 300 stockholders of round lots, with a market value of at least $1,000,000, and have net tangible assets of at least $1,000,000, $2,000,000 or $4,000,000, depending on profitability levels during the issuer's four most recent fiscal years. If these standards are not met, the Shares might nevertheless continue to be included in the NASD's Nasdaq Stock Market (the "Nasdaq Stock Market") with quotations published in the Nasdaq "additional list" or in one of the "local lists", but if the number of holders of the Shares were to fall below 300, or if the number of publicly held Shares were to fall below 100,000 or there were not at least two registered and active market makers for the Shares, the NASD's rules provide that the Shares would no longer be "qualified" for Nasdaq Stock Market reporting and the Nasdaq Stock Market would cease to provide any quotations. Shares held directly or indirectly by directors, officers or beneficial owners of more than 10% of the Shares are not considered as being publicly held for this purpose. According to the Company 10-K, as of April 1, 1996 there were approximately 2,234 holders of record of Shares and, according to the Company 10-Q, as of May 11, 1996 there were 18,592,130 Shares outstanding. If, as a result of the purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet the requirements of the NASD for continued inclusion in the Nasdaq National Market or in any other tier of the Nasdaq Stock Market and the Shares are no longer included in the Nasdaq National Market or in any other tier of the Nasdaq Stock Market, as the case may be, the market for Shares could be adversely affected. In the event that the Shares no longer meet the requirements of the NASD for continued inclusion in any tier of the Nasdaq Stock Market, it is possible that the Shares would continue to trade in the over-the-counter market and that price quotations would be reported by other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend upon the number of holders of Shares remaining, at such time, the interest in maintaining a market in Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act, as described below, and other factors. Exchange Act Registration. The Shares are currently registered under the Exchange Act. Registration of the Shares under the Exchange Act may be terminated upon application of the Company to the Commission if the Shares are neither listed on a national securities exchange nor held by 300 or more holders of record. Termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to its stockholders and to the Commission and would make certain provisions of the Exchange Act no longer applicable to the Company, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy statement pursuant to Section 14(a) of the Exchange Act in connection with stockholders' meetings and the related requirement of furnishing an annual report to stockholders and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions. Furthermore, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 or 144A promulgated under the Securities Act of 1933, as amended, may be impaired or eliminated. The Purchaser intends to seek to cause the Company to apply for termination of registration of the Shares under the Exchange Act as soon after the completion of the Offer as the requirements for such termination are met. If registration of the Shares is not terminated prior to the Proposed Merger, then the Shares will be delisted from all stock exchanges and the registration of the Shares under the Exchange Act will be terminated following the consummation of the Proposed Merger. Effect of the Offer on the Convertible Debentures. Although the Company 10-K discloses that the Convertible Debentures are not registered under Section 12 of the Exchange Act and, as a result, do not meet the qualification requirements of the NASD for inclusion in the Nasdaq Stock Market, to date the Convertible Debentures have been so included. Depending on the amount of Convertible 11 14 Debentures that are converted into Shares as a result of the Offer, the reduced principal amount may cause the Convertible Debentures to no longer meet an additional qualification requirement of NASD for continued inclusion in the Nasdaq Stock Market that the issue have at least two registered and active market makers. Accordingly, the Nasdaq Stock Market may cease to provide any quotations. Margin Regulations. The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of the Shares. Depending upon factors similar to those described above regarding listing and market quotations, it is possible that, following the Offer, the Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for loans made by brokers. In any event, the Shares will cease to be "margin securities" if registration of the Shares under the Exchange Act is terminated. 8. CERTAIN INFORMATION CONCERNING THE COMPANY. The Company is an Alabama corporation with its principal offices at 2600 Morgan Road, S.E., Bessemer, Alabama 35023. According to the Company 10-K, the Company's principal line of business is operating a chain of drug stores in five states in the southeastern United States. Set forth below is certain selected consolidated financial information with respect to the Company and its subsidiaries excerpted from the information contained in the Company Annual Report and the Company 10-Q. More comprehensive financial information is included in the Company 10-K, the Company 10-Q and other documents filed by the Company with the Commission, and the following summary is qualified in its entirety by reference to the Company Annual Report, the Company 10-Q and such other documents and all the financial information (including any related notes) contained therein. The Company Annual Report, the Company 10-Q and such other documents should be available for inspection and copies thereof should be obtainable in the manner set forth below under "Available Information." 12 15 BIG B, INC. SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL QUARTER FISCAL YEAR ENDED ENDED --------------------------------------- ------------------- FEBRUARY 3, JANUARY 28, JANUARY 29, MAY 11, MAY 6, 1996 1995 1994 1996 1995 ----------- ----------- ----------- -------- -------- (53 WEEKS) (52 WEEKS) (52 WEEKS) (UNAUDITED) SUMMARY OF EARNINGS DATA: Net sales....................... $ 737,146 $ 668,205 $ 595,712 $208,783 $195,183 Cost of products sold........... 521,186 460,925 412,560 147,092 136,101 Income before taxes............. 4,724 23,775 18,434 2,864 7,697 Net income...................... 2,624 15,097 11,752 1,789 4,807 NET INCOME PER COMMON SHARE: Primary......................... $ 0.15 $ 0.97 $ 0.76 $ 0.10 $ 0.31 Fully diluted................... $ 0.15 $ 0.89 $ 0.72 $ 0.10 $ 0.28 BALANCE SHEET DATA: (1) Total current assets............ $ 214,456 $ 199,762 $218,713 Total assets.................... 298,836 273,492 300,700 Total current liabilities....... 68,452 79,092 74,410 Total liabilities............... 153,588 166,759 154,468 Total stockholders' equity...... $ 145,248 $ 106,733 $146,232
- --------------- (1) At period end. On August 20, 1996, the Company issued a press release that included the following: "Big B, Inc. (OTC: BIGB) announced today record sales of $381,897,000 for the twenty-six week period ended August 3, 1996, an increase of 7.7% over sales of $354,742,000 in the prior year. For the twelve week second quarter, sales rose 8.5% to a record $173,114,000 as compared to $159,559,000 previously. Comparable store sales improved 6% for the quarter and 5% for the twenty-six weeks. Net earnings for the quarter were $1,542,000 or $.08 per share as compared to $3,235,000 or $.16 per share in the prior year. For the twenty-six week period, earnings were $3,336,000 or $.18 per share compared to $8,047,000 and $.44 per share previously." The indenture for the Convertible Debentures (the "Debenture Indenture") contains a covenant pursuant to which, upon a change of control of the Company, the holders of the Convertible Debentures would have the right to require the Company to purchase their Convertible Debentures for 100% of the principal amount thereof. The consummation of the Offer on the terms described herein would constitute a "change of control" under the Debenture Indenture. If all such holders elect to require repurchase of their Convertible Debentures following consummation of the Offer rather than tendering the Shares into which the Convertible Debentures are convertible pursuant to the Offer, the Company will be required to purchase an aggregate of $40,250,000 principal amount of Convertible Debentures. The Convertible Debentures are currently convertible into Shares at a price of $12.20 per Share, which is less than the Offer Price. In addition, the Company's bank credit facility (which is not publicly available) may contain provisions pursuant to which, upon consummation of the Offer, the Company would be required to repay all amounts outstanding under the credit facility. As of February 3, 1996 there was an aggregate of $21,255,000 outstanding under the credit facility. Accordingly, upon consummation of the Offer, the Company may need to refinance up to an aggregate of $61,505,000 of its debt. 13 16 Available Information. The Company is subject to the informational requirements of the Exchange Act and, in accordance therewith, is required to file reports 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 and other matters, the principal holders of the Company's securities' and any material interest of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's stockholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the public reference facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located at Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street (Suite 1400), Chicago, Illinois 60661. Such reports, proxy statements and other information may also be obtained at the Web site that the Commission maintains at http://www.sec.gov. Copies of such information should be obtainable, by mail, upon payment of the Commission's customary charges, by writing to the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material should also be available for inspection at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006. The information concerning the Company contained herein has been taken from or based upon publicly available documents on file with the Commission and other publicly available information. Although the Purchaser and Parent do not have any knowledge that any such information is untrue, neither the Purchaser nor Parent takes any responsibility for the accuracy or completeness of such information or for any failure by the Company to disclose events that may have occurred and may affect the significance or accuracy of any such information. 9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT General. The Purchaser, a Delaware corporation and a wholly owned subsidiary of Parent, was organized to acquire the Company and has not conducted any unrelated activities since its organization. The principal office of the Purchaser is located at the principal office of Parent. All outstanding shares of capital stock of the Purchaser are owned by Parent. Parent is a Delaware corporation with its principal office located at 1925 Enterprise Parkway, Twinsburg, OH 44087. Parent operates the second largest retail drugstore chain in the United States in terms of store count, while ranking third in sales volume. Set forth below is certain selected consolidated financial information with respect to Parent and its subsidiaries excerpted from the information contained in Parent's 1996 Annual Report on Form 10-K (the "Parent 10-K") filed with the Commission under the Exchange Act and Parent's 1996 Annual Report to Stockholders (the "Parent Annual Report"). More comprehensive financial information is included in the Parent 10-K, the Parent Annual Report and other documents filed by Parent with the Commission, and the following summary is qualified in its entirety by reference to the Parent 10-K, the Parent Annual Report and such other documents and all the financial information (including any related notes) contained therein. The Parent 10-K, the Parent Annual Report and such other documents should be available for inspection and copies thereof should be obtainable in the manner set forth below, under "Available Information." 14 17 REVCO D.S., INC. SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN MILLIONS, EXCEPT PER SHARE DATA)
FISCAL YEAR ENDED ---------------------------------------------- JUNE 1, 1996 JUNE 3, 1995 MAY 28, 1994 ------------ ------------ ------------ SUMMARY OF EARNINGS DATA: Net sales........................................... $5,087.7 $4,431.9 $2,504.0 Operating profit.................................... 206.2 175.7 100.5 Net income.......................................... 76.2 58.3 38.7 Net income per share of common stock................ 1.14 0.91 0.77 BALANCE SHEET DATA: (1) Total current assets................................ $1,116.8 $1,089.0 Total assets........................................ 2,133.5 2,149.8 Total current liabilities........................... 703.5 689.5 Total liabilities................................... 1,264.9 1,376.7 Total stockholder's equity.......................... $ 868.6 $ 773.1
- --------------- (1) At period end. Available Information. Parent is subject to the informational requirements of the Exchange Act and, in accordance therewith, files reports relating to its business, financial condition and other matters. Information, as of particular dates, concerning Parent's directors and officers, their remuneration, stock options and other matters, the principal holders of Parent's securities and any material interest of such persons in transactions with Parent is required to be disclosed in proxy statements distributed to Parent's stockholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the Commission and copies thereof should be obtainable from the Commission in the same manner as is set forth with respect to the Company in Section 8. Such material should also be available for inspection at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, NY 10005. Certain Litigation. On September 9, 1993, Talton R. Embry, a director of Parent, and Magten Asset Management Corporation ("Magten"), an investment advisory firm established by Mr. Embry, without admitting or denying the allegations in a complaint by the Commission, consented to the entry of judgments enjoining them from violating (and, in the case of Mr. Embry, aiding and abetting violations of) anti-fraud and other provisions of the Exchange Act, the Investment Advisers Act of 1940, as amended, and the Investment Company Act of 1940, as amended. The Commission's complaint alleged principally that Mr. Embry failed to advise clients of certain personal trades relevant to the clients' holdings, to obtain certain consents required under applicable law in connection therewith and to comply with certain reporting requirements. The complaint did not involve the securities of Parent. As part of the settlement, Mr. Embry made a $1 million payment for the benefit of certain of Magten's clients. On April 28, 1995, a Parent stockholder, suing derivatively on behalf of Parent, filed a complaint in U.S. District Court for the Southern District of New York which named Magten, Mr. Embry, certain of Magten's clients, and Parent as defendants. The complaint alleges that Magten's clients violated the "short swing profits" laws, Section 16(b) of the Exchange Act, by selling shares issued by Parent in a July 1994 offering within six months of that offering. Magten's attorneys filed a motion for summary judgment asserting that the allegedly violative conduct is expressly exempted from the "short swing profits" laws. On February 6, 1996, the District Court dismissed the action in its entirety. On February 22, 1996, the plaintiff appealed the District Court's decision. 15 18 During fiscal 1994, Thomas O. Thorsen, a director of Parent, consented, without a hearing and without admitting or denying the matters set forth therein, to the issuance of an order of the Commission, and to the entry of the findings and imposition of the remedial sanctions set forth therein. The order stated that during the time Mr. Thorsen served as Chief Financial Officer of Travelers, Travelers failed to disclose certain financial information in conformity with the requirements of the Exchange Act and the rules promulgated thereunder in certain periodic filings with the Commission. The Commission ordered Mr. Thorsen to cease and desist from causing any violation and any future violation of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13. Except as set forth above, to the best knowledge of Parent and the Purchaser, during the last 5 years, no executive officer or director of, or person controlling, Parent or the Purchaser or any officer or director of any corporation or other person ultimately controlling Parent or the Purchaser 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. To the best knowledge of Parent and the Purchaser, during the last 5 years, no executive officer or director of, or person controlling, Parent or the Purchaser or any officer or director of any corporation or other person ultimately controlling Parent or the Purchaser has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). 10. SOURCE AND AMOUNT OF FUNDS The Purchaser estimates that the total amount of funds required to purchase pursuant to the Offer the number of Shares that are outstanding on a fully diluted basis (and not held by the Purchaser) and to pay fees and expenses related to the Offer will be approximately $332 million. The Purchaser plans to obtain all funds needed for the Offer through a capital contribution, which will be made by Parent to the Purchaser at the time Shares tendered pursuant to the Offer are accepted for payment. Parent intends to use its available cash on hand and borrowings to make this capital contribution. Parent has commenced discussions with the Agents (as defined below) to increase its borrowing capacity under the Revolving Credit Facility (as defined below) and to otherwise amend the Revolving Credit Facility to make certain technical amendments desirable in connection with the making of the Offer and the Proposed Merger. The Offer is not contingent upon Parent or the Purchaser's receipt of financing. Parent has a $650 million revolving credit facility (the "Revolving Credit Facility") pursuant to an Amended and Restated Credit Agreement (the "Credit Agreement") dated as of July 27, 1995, among Parent, Banque Paribas and Bank of America Illinois, as managing agents (the "Agents"), Bank of America National Trust and Savings Association, as administrative agent, and the syndicate of lenders party thereto (the "Lenders"). As of September 9, 1996, approximately $396 million was available for borrowing under the Revolving Credit Facility. The Revolving Credit Facility provides for revolving credit of up to $650 million, reducing to $600 million on the third anniversary of the Credit Agreement and to $525 million on the fourth anniversary of the Credit Agreement. The Facility may also be reduced voluntarily by Parent. The Credit Agreement provides for the payment by Parent of (i) a non-use fee on the aggregate unused commitment of the Lenders under the Revolving Credit Facility, regardless of utilization, (ii) a fronting fee with respect to letters of credit and a letter of credit fee based on the average outstanding amount of letters of credit and (iii) certain other administrative fees. The interest rate on loans varies depending on the type of loan, length of interest rate period chosen and current market rate of certain types of loans. The Credit Agreement contains customary conditions to borrowing, representations and warranties, covenants and events of default. 16 19 The commitment of the Lenders expires no later than July 27, 2000. Purchaser has made no arrangements to refinance its borrowings under the Revolving Credit Facility. The foregoing description of the Revolving Credit Facility is qualified in its entirety by reference to the text of the Credit Agreement filed as an exhibit to the Tender Offer Statement on Schedule 14D-1 and Statement on Schedule 13D of the Purchaser and Parent filed with the Commission in connection with the Offer (the "Schedule 14D-1") and is incorporated herein by reference. 11. CONTACTS AND TRANSACTIONS WITH THE COMPANY; BACKGROUND OF THE OFFER D. Dwayne Hoven, President and Chief Executive Officer of Parent, and Anthony J. Bruno, Chairman and Chief Executive Officer of the Company, met at the Company's headquarters on August 1, 1996. At this meeting Mr. Hoven indicated Parent's interest in purchasing all the stock of the Company for cash or a combination of cash and securities. Mr. Bruno stated at that meeting that he believed the Company's stock was undervalued by the market and that, as a result, Parent would have to offer a significant premium over the then current market price of the Shares. On August 5, 1996, Mr. Hoven sent the following letter to Mr. Bruno: Anthony J. Bruno August 5, 1996 Chairman of the Board and Chief Executive Officer Big B, Inc. 2600 Morgan Road, S.E. Bessemer, AL 35023 Dear Anthony: Thank you for taking the time to meet with me last Thursday. Hopefully, you had a fun and exciting time at the Olympics. The following is a brief summary of our discussion on Thursday and includes an offer price: - Revco's Board of Directors has a strong interest in pursuing a merger transaction with your company, whereby Revco would acquire all of your company's outstanding shares at a price of $14.00 a share, payable in cash, stock or a combination of cash and stock. - As a part of the transaction, Revco will assume responsibility for obtaining all requisite antitrust approvals. - Revco's financial situation is such that there will be no financing "out" in the purchase agreement, and Revco could move very fast to conclude a transaction. As discussed, we would be flexible in providing a deal structure that is attractive to you, your family and your employees. We would hope to employ all field employees and entertain suggestions from you regarding corporate employees. I will try to reach you by telephone on Wednesday, August 7, to further discuss this proposal. As I stated in our meeting, I believe that Big B is an excellent fit for Revco, and hopefully, our discussions will conclude with a merger of our two companies. Again, thank you for taking the time to meet with me and for considering this proposal. Sincerely, D. Dwayne Hoven 17 20 On August 7, 1996, Mr. Hoven telephoned Mr. Bruno. In that call Mr. Bruno stated that Parent's proposed offer was not sufficient in light of his view that the Company's stock was undervalued in the market. Mr. Bruno also stated that he would prefer that the Company remain independent until market conditions supported a transaction at a higher price. On September 3, 1996, Mr. Hoven sent the following letter to Mr. Bruno: Mr. Anthony J. Bruno September 3, 1996 Chairman of the Board and Chief Executive Officer Big B, Inc. 2600 Morgan Road, S.E. Bessemer, AL 35023 Dear Anthony: I appreciate the time that you have spent talking with me about your company and the possibility of a business combination between Revco D.S., Inc. ("Revco") and Big B, Inc. ("Big B"). As you know, Revco is prepared to proceed with an acquisition of Big B. As outlined in my August 5, 1996 letter to you and a subsequent telephone conversation, Revco is prepared to pay $14 per share, payable in cash, stock or a combination of cash and stock. This offer represents a 35% premium to Big B's closing price on Friday, August 30. Also, as part of the transaction, Big B will assume responsibility for obtaining all requisite antitrust approvals. Finally, Revco's financial situation is such that there will be no financing "out" in the purchase agreement, and Revco could move very fast to conclude the transaction. There continues to be rapid consolidation in the retail drugstore industry. We believe that an acquisition of Big B is inevitable, and a combination of Revco and Big B offers numerous advantages over either company remaining a stand-alone entity and, for Big B, over any other possible strategic combination. - Revco and Big B represent an excellent geographic fit, without significant overlap of existing Big B stores, distribution centers and other facilities. - A combination of Revco and Big B will allow the combined company to spread fixed costs over a significantly larger base of stores, which will assist the combined company to meet the increasing customer demand for lower pharmacy prices. - A merger with Revco offers your shareholders a significant cash premium to recent trading prices or, if you would prefer, the transaction could be structured to give your shareholders an ongoing equity interest in the combined company. Unfortunately, Big B has elected not to negotiate a transaction with Revco. We are determined to proceed and, in this regard, Revco has already purchased approximately 4.9% of the outstanding Big B shares and intends to purchase additional shares if market conditions permit. It is our very strong preference to work with you toward a negotiated transaction. I believe a friendly transaction would be in the best interests of both our companies, including our customers, employees and communities. For that reason, I am not making this letter public. However, in the event you do not wish to proceed jointly at this time, Revco will consider alternative approaches, including making a proposal directly to your shareholders. As you know, there has been considerable public speculation regarding possible acquisition transactions involving Big B, and Revco will move quickly to protect the value to our shareholders of a combination of Revco with Big B should a competing transaction be announced. In order to ensure that all our constituencies are able to benefit from a prompt combination of Revco and Big B, I urge you to meet with me as soon as possible to discuss terms for the merger of Revco and Big B. You owe it to your shareholders to meet with me to explore this 18 21 opportunity, and I am willing to meet with you at your earliest convenience to discuss all the terms of any transaction. I believe that we could complete any necessary due diligence, agree and sign a definitive agreement very quickly and, subject to the usual conditions, complete this transaction soon thereafter. I look forward to hearing from you by the close of business on Friday. Sincerely, D. Dwayne Hoven On September 4, 1996 Mr. Hoven again telephoned Mr. Bruno. Mr. Bruno stated in that call he believed that the Company would benefit from remaining an independent company. On September 9, 1996, Parent issued a press release announcing the Offer, and Mr. Hoven sent the following letter to Mr. Bruno: Mr. Anthony J. Bruno September 9, 1996 Chairman of the Board and Chief Executive Officer Big B, Inc. 2600 Morgan Road, S.E. Bessemer, AL 35023 Dear Anthony: As you know from our prior conversations, Revco D.S., Inc. is interested in pursuing a business combination with Big B, Inc. Unfortunately, because Big B has to date been unwilling to proceed with such a transaction, we are announcing this morning our offer to buy all of Big B's outstanding shares for a price of $15 per share in cash, or an aggregate equity value of approximately $330 million on a fully diluted basis. As we have previously said, we would be happy to work with you to structure a tax-free transaction to give your shareholders an ongoing equity interest in the combined company. We believe that Revco's offer is a highly attractive opportunity for Big B shareholders representing a premium of 53% over the $9.81 average closing price of Big B stock for the 90-calendar day period ended Friday, September 6, 1996. We believe that this is the fastest, most efficient way to bring our companies together. We hope that the Board of Directors of Big B will recognize the significant benefits to Big B and its shareholders. The combination of Revco and Big B offers numerous advantages over either company remaining as a stand-alone entity, and, for Big B, over any other possible strategic combination. Revco and Big B represent an excellent geographic fit, with only limited overlap of stores and distribution centers. Among other efficiencies, this combination will allow the combined company to spread costs over a larger base of stores. This will assist us in meeting the increasing customer demand for lower pharmacy prices. Revco is a Fortune 500 company and is among the top performers in the drugstore industry. Since 1993, we have more than doubled our sales and operating profit, and net income per share has more than tripled over the same time period. Revco has one of the most technologically advanced pharmacy systems and offers some of the most innovative marketing programs in the drugstore industry, designed to add consumer value and to enhance the pharmacist-patient relationship. 19 22 We have the highest respect for you and all Big B employees. We anticipate retaining the services of Big B's field and distribution center employees and will entertain suggestions from you and your senior management team regarding corporate employees. Like Big B, Revco has always prided itself in its role as a strong community partner and good corporate citizen. Revco and its employees donate time and money to a variety of charitable organizations in the areas we serve. Revco recognizes its corporate responsibility to give back to every community we call home. As a native of Alabama, I am particularly sensitive to those issues in this transaction. Revco's objective is a transaction that is enthusiastically supported by Big B's shareholders and employees, as well as Big B's many loyal customers. Revco and its advisors are prepared to meet with Big B's Board, management and advisors to answer any questions they may have about our offer. We are convinced that this combination serves the best interests of both companies. Sincerely, D. Dwayne Hoven President and Chief Executive Officer, Revco D.S., Inc. Between August 13 and September 6, 1996, the Purchaser purchased in open market transactions, including block trades, a total of 1,190,000 Shares at prices, including brokers' commissions, ranging from $10.75 to $12.625. See Schedule II hereto. Except as described in this Offer to Purchase (including Schedules I and II hereto), none of the Purchaser, Parent or, to the best knowledge of Parent and the Purchaser, any of the persons listed in Schedule I hereto, or any associate or majority owned subsidiary of the Purchaser, Parent or any of the persons so listed, beneficially owns any equity security of the Company, and none of the Purchaser, Parent or, to the best knowledge of Parent and the Purchaser, any of the other persons referred to above, or any of the respective directors, executive officers or subsidiaries of any of the foregoing, has effected any transaction in any equity security of the Company during the past 60 days. The Purchaser and Parent disclaim beneficial ownership of any Shares owned by any pension plan of Parent or any affiliate of Parent. Except as described in this Offer to Purchase, as of the date hereof (a) there have not been any contacts, transactions or negotiations between the Purchaser or Parent, any of their respective subsidiaries or, to the best knowledge of Parent and the Purchaser, any of the persons listed in Schedule I hereto, on the one hand, and the Company or any of its directors, officers or affiliates, on the other hand, that are required to be disclosed pursuant to the rules and regulations of the Commission and (b) none of the Purchaser, Parent or, to the best knowledge of Parent and the Purchaser, any of the persons listed in Schedule I hereto has any contract, arrangement, understanding or relationship with any person with respect to any securities of the Company. During the Offer, the Purchaser and Parent intend to have ongoing contacts and negotiations with the Company and its directors, officers and stockholders. 12. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY Purpose. The purpose of the Offer and the Proposed Merger is to enable Parent to acquire control of, and the entire equity interest in, the Company. The Offer, as the first step in the acquisition of the Company, is intended to facilitate the acquisition of all the Shares. Parent currently intends, as soon as practicable following consummation of the Offer, to act to have its nominees elected to the Company's board of directors to replace the Company's current board and to propose and seek to consummate the Proposed Merger. The purpose of the Proposed Merger is to acquire 20 23 all Shares not tendered and purchased pursuant to the Offer or otherwise. Pursuant to the Proposed Merger, each then outstanding Share (other than Shares owned by the Purchaser, Parent or any of their subsidiaries, Shares held in the treasury of the Company and Shares owned by stockholders who perfect any available dissenters' rights under the ABCA) would be converted into the right to receive an amount in cash equal to the price per Share paid by the Purchaser pursuant to the Offer. Except in the case of a "short-form" merger as described below, under the ABCA, unless the Company's articles of incorporation otherwise provide, the approval of the Company's Board of Directors and the affirmative vote of holders of 66-2/3% of the outstanding Shares (including any Shares owned by the Purchaser) would be required to approve the Proposed Merger. If the Purchaser consummates the Offer and, as a result, owns a majority of the outstanding Shares but less than 66-2/3% of such Shares, the Purchaser currently intends to seek to consummate the Proposed Merger by acquiring a sufficient number of additional Shares so that it owns 66-2/3% of the outstanding Shares, by seeking the votes of the holders of a sufficient number of Shares in addition to those owned by the Purchaser in order to consummate the Proposed Merger or by amending the Company's articles of incorporation to provide for stockholder approval of the Proposed Merger by the holders of a majority of the outstanding Shares. If the Purchaser acquires, through the Offer or otherwise, voting power with respect to at least 66-2/3% of the outstanding Shares and the Purchaser were to accept for payment Shares tendered pursuant to the Offer, it would have sufficient voting power to effect the Proposed Merger without the vote of any other stockholder of the Company. The ABCA provides that if a parent company owns at least 80% of each class of stock of a subsidiary, the parent can effect a "short-form" merger of that subsidiary into it without a stockholder vote. Accordingly, if as a result of the Offer or otherwise, the Purchaser owns at least 80% of the outstanding Shares, the Purchaser could, and currently intends to, effect the Proposed Merger without any stockholder vote. If the Proposed Merger has not been consummated, the Purchaser or an affiliate of the Purchaser may, either immediately following the consummation or termination of the Offer (whether or not the Purchaser purchases Shares pursuant to the Offer), or from time to time thereafter, seek to acquire additional Shares through open market purchases, privately negotiated transactions, a tender offer or exchange offer or otherwise, upon such terms and at such prices as it may determine, which may be more or less than the price to be paid pursuant to the Offer. Alternatively, the Purchaser and its affiliates reserve the right to sell or otherwise dispose of any or all of the Shares acquired by them pursuant to the Offer or otherwise, upon such terms and at such prices as they determine. The precise timing and other details of the Proposed Merger or other business combination transaction will depend on a variety of factors such as general economic conditions and prospects, the future prospects, asset value and earnings of the Company, the number of Shares acquired by the Purchaser pursuant to the Offer or otherwise and the statutory requirements described above. The Purchaser can give no assurance that a merger or other business combination will be proposed or that, if it is proposed, it will not be delayed or abandoned. The Purchaser expressly reserves the right not to propose any merger or similar business combination involving the Company, or to propose a merger or other business combination on terms other than those set forth herein, and its ultimate decision could be affected by information hereafter obtained by the Purchaser, changes in general economic or market conditions or in the business of the Company or other factors. 21 24 Parent intends to seek to negotiate with the Company with respect to the acquisition of the Company by Parent. If such negotiations result in a definitive merger agreement with the Company, the consideration to be received by holders of Shares could include or consist of securities, cash or any combination thereof. Accordingly, such negotiations could result in, among other things, termination of the Offer (see Section 14) and submission of a different acquisition proposal upon terms agreed to by the parties to the Company's stockholders for their approval, which proposal may include a price per Share of more or less than the price to be paid pursuant to the Offer. Plans for the Company. Upon consummation of the Offer, Parent will evaluate the Company's operations to determine what cost savings and other synergies will be available to the combined entities. Parent expects, upon completion of that evaluation, that it will conclude that certain of the Company's stores should be closed. Parent currently expects that it will retain and possibly expand the Company's distribution center in Bessemer, Alabama. Parent expects that the Company's general corporate and administrative functions will be consolidated into those of Parent. Except as described in this Offer to Purchase, Parent and the Purchaser have no present plans or proposals which relate to or would result in: the acquisition by any person of additional securities of the Company, or the disposition of securities of the Company; an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries; a sale or transfer of a material amount of assets of the Company or any of its subsidiaries; any change in the present board of directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; any material change in the present capitalization or dividend policy of the Company; any other material change in the Company's business or corporate structure; changes in the Company's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Company by any person; causing a class of securities of the Company to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; the Shares becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or any action similar to any of those enumerated above. Dissenters' Rights. Holders of Shares do not have dissenters' rights in connection with the Offer. If the Proposed Merger is consummated, holders of Shares at the effective time of the Proposed Merger will have certain rights pursuant to the provisions of Article XIII of the ABCA ("Article XIII") to dissent and demand appraisal of their Shares. Under Article XIII, dissenting stockholders who comply with the applicable statutory procedures will be entitled to obtain in payment for the fair value of their Shares immediately prior to the effectiveness of the Proposed Merger (exclusive of any appreciation or depreciation arising in anticipation of the Proposed Merger unless exclusion would be inequitable) in cash, together with interest from the effective date of the Proposed Merger at the average rate paid by the Company on its principal bank loans, or, if none, at a rate that is fair and equitable under the circumstances. Assuming compliance with the statutory procedures, dissenting stockholders will also be entitled, in the absence of agreement between the Company and the stockholder regarding the fair value of his Shares, to receive a judicial determination of such value. Any such judicial determination of the fair value of Shares could be based upon factors other than, or in addition to, the price per Share to be paid in the Proposed Merger or the market value of the Shares. The value so determined could be more or less than the price per Share to be paid in the Proposed Merger. The foregoing summary of Article XIII does not purport to be complete and is qualified in its entirety by reference to Article XIII. In addition, Parent intends to seek to negotiate with the Company with respect to the acquisition of the Company by Parent. If such negotiations result in a definitive merger agreement between the 22 25 Company and Parent (other than with respect to the Proposed Merger), holders of Shares may or may not have appraisal rights under Article XIII in connection with the consummation of the merger contemplated thereby, depending upon the terms of any such merger. Going Private Transactions. The Commission has adopted Rule 13e-3 under the Exchange Act, which is applicable to certain "going private" transactions and which may under certain circumstances be applicable to the Proposed Merger or any other merger involving the Company. However, Rule 13e-3 will be inapplicable to the Proposed Merger if (a) the Shares are deregistered under the Exchange Act prior to the Proposed Merger or (b) the Proposed Merger is consummated within one year after the purchase of the Shares pursuant to the Offer and the Proposed Merger provides for stockholders to receive cash for their Shares in an amount at least equal to the amount paid per Share in the Offer. If applicable, Rule 13e-3 requires, among other things, that certain financial information concerning the fairness of the proposed transaction and the consideration offered to minority stockholders in such transaction be filed with the Commission and disclosed to stockholders prior to the consummation of the transaction. 13. DIVIDENDS AND DISTRIBUTIONS If, on or after September 9, 1996, the Company should (a) split, combine or otherwise change the Shares or its capitalization, (b) acquire or otherwise cause a reduction in the number of outstanding Shares or other securities or (c) issue or sell additional Shares (other than the issuance of Shares under option prior to September 9, 1996, in accordance with the terms of such options as publicly disclosed prior to September 9, 1996 and other than the issuance of Shares upon conversion of Convertible Debentures pursuant to the terms of the Convertible Debentures as publicly disclosed prior to September 9, 1996), shares of any other class of capital stock, other voting securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, then, subject to the provisions of Section 14, the Purchaser, in its sole discretion, may make such adjustments as it deems appropriate in the Offer Price and other terms of the Offer, including, without limitation, the number or type of securities offered to be purchased. If, on or after September 9, 1996, the Company should declare or pay any cash dividend on the Shares or other distribution on the Shares (except for regular quarterly dividends on the Shares declared and paid at times consistent with past practice in an amount not in excess of $0.05 per Share per quarter), or issue with respect to the Shares any additional Shares, shares of any other class of capital stock, other voting securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, payable or distributable to stockholders of record on a date prior to the transfer of the Shares purchased pursuant to the Offer to the Purchaser or its nominee or transferee on the Company's stock transfer records, then, subject to the provisions of Section 14, (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 such 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. 23 26 14. CERTAIN CONDITIONS OF THE OFFER Notwithstanding any other term or provision of the Offer, the Purchaser will 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 the termination or withdrawal of the Offer), to pay for any Shares not theretofore accepted for payment or paid for unless (1) the Minimum Tender Condition shall have been satisfied and (2) any waiting period under the HSR Act applicable to the purchase of Shares pursuant to the Offer shall have expired or been terminated. Furthermore, notwithstanding any other term or provision of the Offer, the Purchaser will not be required to accept for payment or, subject as aforesaid, to pay for any Shares not theretofore accepted for payment or paid for, and may terminate or amend the Offer if, at any time on or after September 9, 1996 and before the acceptance of such Shares for payment or the payment therefor, any of the following events or facts shall have occurred: (a) there shall be threatened, instituted or pending any action, proceeding, application or counterclaim by any government or governmental, legislative, regulatory or administrative authority or agency, domestic, foreign or supranational (each, a "Governmental Entity"), or by any other person, domestic or foreign, before any court or Governmental Entity, (i) (A) challenging or seeking to, or which is reasonably likely to, make illegal, delay or otherwise directly or indirectly restrain or prohibit, or seeking to, or which is reasonably likely to, impose voting, procedural, price or other requirements, in addition to those required by Federal securities laws and the ABCA (each as in effect on the date of this Offer to Purchase), in connection with, the making of the Offer, the acceptance for payment of, or payment for, some of or all the Shares by the Purchaser, Parent or any other affiliate of Parent or the consummation by the Purchaser, Parent or any other affiliate of Parent of a merger or other similar business combination with the Company, (B) seeking to obtain material damages or (C) otherwise directly or indirectly relating to the transactions contemplated by the Offer or any such merger or business combination, (ii) seeking to prohibit the ownership or operation by the Purchaser, Parent or any other affiliate of Parent of all or any portion of the business or assets of the Company and its subsidiaries or of the Purchaser, Parent or any other affiliate of Parent or to compel the Purchaser, Parent or any other affiliate of Parent to dispose of or hold separate all or any portion of the business or assets of the Company or any of its subsidiaries or of the Purchaser, Parent or any other affiliate of Parent or seeking to impose any limitation on the ability of the Purchaser, Parent or any other affiliate of Parent to conduct such business or own such assets, (iii) seeking to impose or confirm limitations on the ability of the Purchaser, Parent or any other affiliate of Parent effectively to exercise full rights of ownership of the Shares, including, without limitation, the right to vote any Shares acquired or owned by the Purchaser, Parent or any other affiliate of Parent on all matters properly presented to the Company's stockholders, (iv) seeking to require divestiture by the Purchaser, Parent or any other affiliate of Parent of any Shares, (v) seeking any material diminution in the benefits expected to be derived by the Purchaser, Parent or any other affiliate of Parent as a result of the transactions contemplated by the Offer or any merger or other similar business combination with the Company, (vi) otherwise directly or indirectly relating to the Offer or which otherwise, in the sole judgment of the Purchaser, might materially adversely affect the Company or any of its subsidiaries or the Purchaser, Parent or an other affiliate of Parent or the value of the Shares or (vii) in the sole judgment of the Purchaser, materially adversely affecting the business, properties, assets, liabilities, capitalization, stockholders' equity, condition (financial or otherwise), operations, licenses or franchises, results of operations or prospects of the Company or any of its subsidiaries; (b) there shall be any action taken, or any statute, rule, regulation, legislation, interpretation, judgment, order or injunction proposed, enacted, enforced, promulgated, amended, issued or deemed applicable to (i) the Purchaser, Parent or any other affiliate of Parent or the 24 27 Company or any of its subsidiaries or (ii) the Offer or any merger or other similar business combination by the Purchaser, Parent or any other affiliate of Parent with the Company, by any court or Governmental Entity, other than the routine application of the waiting period provisions of the HSR Act to the Offer, that, in the sole judgment of the Purchaser, might, directly or indirectly, result in any of the consequences referred to in clauses (i) through (vii) of paragraph (a) above; (c) any change shall have occurred or been threatened (or any condition, event or development shall have occurred or been threatened involving a prospective change) in the business, properties, assets, liabilities, capitalization, stockholders' equity, condition (financial or otherwise), operations, licenses or franchises, results of operations or prospects of the Company or any of its subsidiaries that, in the sole judgment of the Purchaser, is or may be materially adverse to the Company or any of its subsidiaries, or the Purchaser shall have become aware of any facts that, in the sole judgment of the Purchaser, have or may have material adverse significance with respect to either the value of the Company or any of its subsidiaries or the value of the Shares to the Purchaser, Parent or any other affiliate of Parent; (d) there shall have occurred or been threatened (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States, (ii) any extraordinary or material adverse change in the financial markets or major stock exchange indices in the United States or abroad or in the market price of Shares, (iii) any change in the general political, market, economic or financial conditions in the United States or abroad that could, in the sole judgment of the Purchaser, have a material adverse effect upon the business, properties, assets, liabilities, capitalization, stockholders' equity, condition (financial or otherwise), operations, licenses or franchises, results of operations or prospects of the Company or any of its subsidiaries or the trading in, or value of, the Shares, (iv) any material change in United States currency exchange rates or any other currency exchange rates or a suspension of, or limitation on, the markets therefor, (v) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (vi) any limitation (whether or not mandatory) by any Governmental Entity on, or other event that, in the sole judgment of the Purchaser, might affect, the extension of credit by banks or other lending institutions, (vii) a commencement of a war or armed hostilities or other national or international calamity directly or indirectly involving the United States or (viii) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; (e) the Company or any of its subsidiaries shall have (i) split, combined or otherwise changed, or authorized or proposed a split, combination or other change of, the Shares or its capitalization, (ii) acquired or otherwise caused a reduction in the number of, or authorized or proposed the acquisition or other reduction in the number of, outstanding Shares or other securities, (iii) issued or sold, or authorized or proposed the issuance, distribution or sale of, additional Shares (other than the issuance of Shares under option prior to September 9, 1996, in accordance with the terms of such options as publicly disclosed prior to September 9, 1996 and other than the issuance of Shares upon conversion of Convertible Debentures pursuant to the terms of the Convertible Debentures as publicly disclosed prior to September 9, 1996), shares of any other class of capital stock, other voting securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, (iv) declared or paid, or proposed to declare or pay, any dividend or other distribution, whether payable in cash, securities or other property, on or with respect to any shares of capital stock of the Company (except for regular quarterly dividends on the Shares declared and paid at times consistent with past practice in an amount not in excess of $0.05 per Share per quarter), (v) altered or proposed to alter any material term of any outstanding security, (vi) incurred any debt other than in the ordinary course of business or any debt containing burdensome covenants, (vii) authorized, recommended, proposed or entered into an agreement with 25 28 respect to any merger, consolidation, liquidation, dissolution, business combination, acquisition of assets, disposition of assets, release or relinquishment of any material contractual or other right of the Company or any of its subsidiaries or any comparable event not in the ordinary course of business, (viii) authorized, recommended, proposed or entered into, or announced its intention to authorize, recommend, propose or enter into, any agreement or arrangement with any person or group that in the sole judgment of the Purchaser could adversely affect either the value of the Company or any of its subsidiaries or the value of the Shares to the Purchaser, Parent or any other affiliate of Parent, (ix) entered into any employment, severance or similar agreement, arrangement or plan with or for the benefit of any of its employees other than in the ordinary course of business or entered into or amended any agreements, arrangements or plans so as to provide for increased or accelerated benefits to the employees as a result of or in connection with the transactions contemplated by the Offer, (x) except as may be required by law, taken any action to terminate or amend any employee benefit plan (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended) of the Company or any of its subsidiaries, or the Purchaser shall have become aware of any such action that was not disclosed in publicly available filings prior to September 9, 1996, (xi) amended, or authorized or proposed any amendment to, its articles of incorporation or its by-laws, or the Purchaser shall become aware that the Company or any of its subsidiaries shall have proposed or adopted any such amendment that was not disclosed in publicly available filings prior to September 9, 1996 or (xii) otherwise acted out of the ordinary course of business, consistent with past practice; (f) a tender or exchange offer for any Shares shall have been made or publicly proposed to be made by any other person (including the Company or any of its subsidiaries or affiliates, but excluding the Purchaser and Parent); or it shall have been publicly disclosed or the Purchaser shall have otherwise learned that (i) any person, entity (including the Company or any of its subsidiaries, but excluding the Purchaser and Parent) or "group" (within the meaning of Section 13(d)(3) of the Exchange Act) shall have acquired or proposed to acquire beneficial ownership of more than 5% of any class or series of capital stock of the Company (including the Shares), through the acquisition of stock, the formation of a group or otherwise, or shall have been granted any right, option or warrant, conditional or otherwise, to acquire beneficial ownership of more than 5% of any class or series of capital stock of the Company (including the Shares), other than acquisitions for bona fide arbitrage purposes only and other than as disclosed in a Schedule 13D or 13G on file with the Commission prior to September 9, 1996, (ii) any such person, entity or group that prior to September 9, 1996, had filed such a Schedule with the Commission has acquired or proposes to acquire, through the acquisition of stock, the formation of a group or otherwise, beneficial ownership of 1% or more of any class or series of capital stock of the Company (including the Shares), or shall have been granted any right, option or warrant, conditional or otherwise, to acquire beneficial ownership of 1% or more of any class or series of capital stock of the Company (including the Shares), (iii) any person or group (other than the Purchaser and Parent) shall have entered into a definitive agreement or an agreement in principle or made a proposal with respect to a tender offer or exchange offer or a merger, consolidation or other business combination with or involving the Company or (iv) any person (other than the Purchaser and Parent) shall have filed a Notification and Report Form under the HSR Act (or amended a prior filing to increase the applicable filing threshold set forth therein)or made a public announcement reflecting an intent to acquire the Company or any assets or subsidiaries of the Company; (g) any approval, permit, license, authorization, favorable review or consent of any Governmental Entity (including those described or referred to in Section 15) that would be required or desirable for the acquisition or ownership of the Shares by the Purchaser as described herein shall not have been obtained on terms satisfactory to Purchaser in its sole discretion; or 26 29 (h) the Purchaser shall have reached an agreement or understanding with the Company providing for termination of the Offer, or the Purchaser, Parent or any other affiliate of Parent shall have entered into a definitive agreement or announced an agreement in principle with the Company providing for a merger or other business combination with the Company or the purchase of stock or assets of the Company; which, in the sole judgment of the Purchaser in any such case, and regardless of the circumstances (including any action or inaction by the Purchaser, Parent or any other affiliate of Parent) giving rise to any such condition, makes it inadvisable to proceed with the Offer and/or with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of the Purchaser and Parent and may be asserted by the Purchaser regardless of the circumstances giving rise to any such condition 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 will not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances will not be deemed a waiver with respect to any other facts and circumstances and each such right will be deemed an ongoing right that 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. 15. CERTAIN LEGAL MATTERS Except as described in this Section 15, based on a review of publicly available filings made by the Company with the Commission and other publicly available information concerning the Company, neither the Purchaser nor Parent is aware of 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 Purchaser's acquisition of Shares (and the indirect acquisition of the stock of the Company's subsidiaries) as contemplated herein or of any approval or other action by any Governmental Entity that would be required or desirable for the acquisition or ownership of Shares by the Purchaser as contemplated herein. Should any such approval or other action be required or desirable, the Purchaser and Parent currently contemplate that such approval or other action will be sought, except as described below under "State Takeover Laws." The Company's pharmacists are required to be licensed by various state pharmacy boards and the Federal Drug Enforcement Administration (the "FDEA"). The Company's pharmacies and the Company's pharmacy distribution center are also registered with the FDEA and certain state regulatory agencies. Many of the Company's stores sell alcoholic beverages and are subject to various state and local liquor licensing requirements as a result. By virtue of these requirements, the Purchaser or the Company may be obligated to obtain certain governmental consents and approvals in connection with the Offer and the Proposed Merger. 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 consummation of the Offer and the Proposed Merger. While, except as otherwise expressly described in this Section 15, the Purchaser does not currently intend to delay the acceptance for payment of or payment for Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that failure to obtain any such approval or other action might not result in consequences adverse to the Company's business or that certain parts of the Company's business might not have to be disposed of if such approvals were not obtained or such other actions were not taken or in order to obtain any such approval or other action. If certain types of adverse action are taken or occur with respect to such matters or the matters discussed below, the Purchaser could decline to accept for payment or pay for any Shares tendered. See Section 14 for the conditions to the Offer. 27 30 State Takeover Laws. A number of states throughout the United States have enacted takeover statutes that purport, in varying degrees, to be applicable to attempts to acquire securities of corporations that are incorporated or have assets, stockholders, executive offices or places of business in such states. In Edgar v. MITE Corp., the Supreme Court of the United States held that the Illinois Business Takeover Act, which involved state securities laws that made the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and therefore was unconstitutional. In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the United States held that a state may, as a matter of corporate law and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without prior approval of the remaining stockholders, provided that such laws were applicable only under certain conditions. Subsequently, a number of Federal courts ruled that various state takeover statutes were unconstitutional insofar as they apply to corporations incorporated outside the state of enactment. The Purchaser has not attempted to comply with any state takeover statutes in connection with the Offer. The Purchaser reserves the right to challenge the validity or applicability of any state law allegedly applicable to the Offer and nothing in this Offer to Purchase nor any action taken in connection herewith is intended as a waiver of that right. In the event that any state takeover statute is found applicable to the Offer, the Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer or be delayed in continuing or consummating the Offer. In such case, the Purchaser may not be obligated to accept for payment or pay for any Shares tendered. See Section 14. Antitrust. Under the provisions of the HSR Act applicable to the Offer, the acquisition of Shares under the Offer may be consummated following the expiration of a 15-calendar day waiting period following the filing by Parent of a Notification and Report Form with respect to the Offer, unless Parent receives a request for additional information or documentary material from the Antitrust Division or the FTC. Parent made such filing on September 10, 1996. If, within the initial 15-day waiting period, either the Antitrust Division or the FTC requests additional information or material from Parent concerning the Offer, the waiting period will 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. Only one extension of the waiting period pursuant to a request for additional information is authorized by the HSR Act. Thereafter, such waiting period may be extended only by court order or with the consent of Parent. In practice, complying with a request for additional information or material can take a significant amount of time. In addition, 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 those 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 Purchaser's proposed acquisition of the Company. At any time before or after the Purchaser's acquisition of Shares pursuant to the Offer, 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 purchase of Shares pursuant to the Offer or the consummation of the Proposed Merger or seeking the divestiture of Shares acquired by the Purchaser or the divestiture of substantial assets of the Company or its subsidiaries or Parent or its subsidiaries. Private parties may also bring legal action under the antitrust laws under certain circumstances. There are certain locations in Georgia and Tennessee in which the Company and Parent both operate drugstores. The Purchaser and Parent do not believe that consummation of the Offer will 28 31 violate the antitrust laws. However, there can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if such a challenge is made, of the result thereof. 16. FEES AND EXPENSES Salomon Brothers is acting as Dealer Manager in connection with the Offer and is providing certain financial advisory services to the Purchaser and Parent in connection with the Offer and the proposed acquisition of the Company. Parent has agreed to pay Salomon Brothers as compensation for such services financial advisory and other related fees of (a) $250,000 upon execution of the engagement letter, (b) $500,000 upon the execution of an agreement or the commencement or public announcement of a tender offer (such as the Offer) or other transaction to acquire the Company and (c) $1,250,000 upon consummation of an acquisition (by merger, tender offer or otherwise) by Parent (or a subsidiary of Parent) of the Company or the purchase by Parent (or a subsidiary of Parent) of all or a significant portion of the assets, or more than 10% of the equity securities, of the Company (an "Acquisition Transaction"). In addition, Parent has agreed that (i) if an Acquisition Transaction does not occur and Parent decides to sell or otherwise dispose of Shares owned by Parent within two years from the date of the engagement letter with Salomon Brothers, Salomon Brothers will be paid an additional fee in an amount equal to 25% of the Purchaser's gain on the sale of its Shares, subject to a cap of $1,750,000 less any fees already paid to Salomon Brothers under clause (b) of the preceding sentence and (ii) if Parent receives a "break-up" or other similar fee (including any amount characterized as an expense reimbursement) in connection with the termination or abandonment of an Acquisition Transaction, Salomon Brothers will be paid an additional fee in an amount equal to 25% of such fee (after deducting Parent's expenses other than fees to Salomon Brothers under this sentence or the preceding sentence), subject to a cap of $2,000,000. Parent has also agreed with Salomon Brothers that, if prior to an Acquisition Transaction or within two years following an Acquisition Transaction Parent determines to sell any subsidiary or division or other significant portion of the Company's assets, then Parent will engage Salomon Brothers as its exclusive financial advisor in connection with such divestiture on customary terms and for customary fees to be agreed upon by Parent and Salomon Brothers. Parent has also agreed to reimburse Salomon Brothers for its reasonable out-of-pocket expenses, including the reasonable fees and expenses of its counsel and any other advisor retained by Salomon Brothers, in connection with its engagement and to indemnify Salomon Brothers and certain related persons against certain liabilities and expenses, including certain liabilities and expenses under the Federal securities laws. Salomon Brothers also is rendering financial advisory services for Parent in addition to those referred to above, and has rendered in the past, and may from time to time in the future render, various financial advisory and other investment banking services to Parent and its affiliates, for which it is receiving, and has received and is expected to receive, customary fees. In the ordinary course of its business, Salomon Brothers engages in securities trading, marketmaking and brokerage activities and may, at any time, hold long or short positions and may trade or otherwise effect transactions in securities of the Company. The Purchaser and Parent have retained D.F. King & Co., Inc. to act as the Information Agent and ChaseMellon Shareholder Services, L.L.C., to serve as the Depositary in connection with the Offer. The Information Agent and the Depositary each will receive reasonable and customary compensation for their services, be reimbursed for certain reasonable out-of-pocket expenses and be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities and expenses under the Federal securities laws. Neither the Purchaser nor Parent will pay any fees or commissions to any broker or dealer or other person (other than the Dealer Manager and the Information Agent) in connection with the 29 32 solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers, banks and trust companies will be reimbursed by the Purchaser upon request for customary mailing and handling expenses incurred by them in forwarding material to their customers. 17. MISCELLANEOUS The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. Neither the Purchaser nor Parent is aware of any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. To the extent the Purchaser or Parent becomes aware of any state law that would limit the class of offerees in the Offer, the Purchaser will amend the Offer and, depending on the timing of such amendment, if any, will extend the Offer to provide for adequate dissemination of such information to holders of Shares prior to the Expiration Date. In any jurisdiction the securities, blue sky or other laws of which require the Offer to be made by a licensed broker or dealer, the Offer is being made on behalf of the Purchaser by the Dealer Manager or one or more registered brokers or dealers licensed under the laws of such jurisdiction. No person has been authorized to give any information or to make any representation on behalf of the Purchaser or Parent not contained herein or in the Letter of Transmittal and, if given or made, such information or representation must not be relied upon as having been authorized. The Purchaser has filed with the Commission the Schedule 14D-1 pursuant to Rule 14d-3 and Rule 13d-1 under the Exchange Act, together with exhibits, furnishing certain additional information with respect to the Offer, and may file amendments thereto. The Schedule 14D-1 and any amendments thereto, including exhibits, should be available for inspection and copies should be obtainable in the manner set forth in Section 8 (except that such material will not be available at the regional offices of the Commission). RDS Acquisition Inc. September 10, 1996 30 33 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER DIRECTORS AND EXECUTIVE OFFICERS OF PARENT The name, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of Parent are set forth below. All such directors and executive officers listed below are citizens of the United States. Unless otherwise indicated, the principal business address of each director or executive officer is Revco D.S., Inc., 1925 Enterprise Parkway, Twinsburg, OH 44087.
NAME, AGE AND POSITION WITH PARENT; PRINCIPAL OCCUPATION OR BUSINESS ADDRESS EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY - ----------------------------------- -------------------------------------------------------- D. Dwayne Hoven (55)............... Mr. Hoven is a Director and was elected Chief Executive Officer of Parent effective August 1993 and was elected President of the Company in July 1992. From July 1992 to August 1993, Mr. Hoven served as Chief Operating Officer of Parent. From December 1991 to July 1992, Mr. Hoven served as Executive Vice President, Marketing and Stores for Parent. From June 1992 to July 1992, Mr. Hoven served as a member of the interim office of the President of Parent. From July 1989 to December 1991, Mr. Hoven served as Executive Vice President of Stores for Parent. From January 1988 to June 1989, Mr. Hoven served as Senior Vice President of Distribution for Parent. Mr. Hoven is also a director of OfficeMax, Inc. Mr. Hoven was selected, effective August 27, 1992, by the Board of Directors to become a member of the Board to fill a vacancy. Carl A. Bellini (62)............... Mr. Bellini is a Director and was elected Executive Vice President and Chief Operating Officer of Parent on October 13, 1993. From August 18, 1992 to October 13, 1993, Mr. Bellini served as Executive Vice President of Marketing and Stores for Parent. From approximately December 1991 to April 1992, Mr. Bellini served as Acting Chief Operating Officer of Standard Brands Paint Co., which filed a bankruptcy proceeding in March 1992 and emerged from bankruptcy during 1993. From June 1989 until June 1991, Mr. Bellini served as President and Chief Operating Officer of Erol's, Inc., a video and electronics chain based in Washington, D.C. From December 1987 to June 1989, Mr. Bellini served as Executive Vice President of Store Operations for Parent. Mr. Bellini was selected, effective August 1, 1994, by the Board of Directors to become a member of the Board to fill a vacancy.
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NAME, AGE AND POSITION WITH PARENT; PRINCIPAL OCCUPATION OR BUSINESS ADDRESS EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY - ----------------------------------- -------------------------------------------------------- Livio M. Borghese (57)............. Mr. Borghese is a Director and is Chairman of Curtis 79 East 79th Street Industries, Inc., a national distributor of hardware New York, NY 10021 products, chemicals and automotive replacement parts and a manufacturer and distributor of security products. He was with Bear Stearns & Co. from 1968 to 1988, ending as Senior Managing Director and Member of the Executive Committee. Mr. Borghese was Chairman of International Corporate Finance at Prudential-Bache Securities in 1989. He presently owns a company engaged in international trading and investments and is a board member of OMI Corp., the United Kingdom Corp. and Noel Group, Inc. Rod F. Dammeyer (55)............... Mr. Dammeyer is a Director and is, and since 1985 has Anixter International Inc. been, President and a director of Anixter International Two North Riverside Plaza Inc. ("Anixter"), a holding and distribution company, Suite 1900 and is, and since 1993 has been, Chief Executive Officer Chicago, IL 60606 of Anixter. Since 1996, Mr. Dammeyer has served as Managing Director of EGI Corporate Investments, Inc., a diversified management and investment company. Mr. Dammeyer is also a director of CapsureHoldings Corp., ANTEC Corporation, Jacor Communications, Inc., Lukens Inc., IMC Global Inc., Sealy Corporation, Falcon Building Products, Inc. (where he has served as Chairman since July 1996), and a trustee of Van Kampen American Capital, Inc. closed-end mutual funds and series trusts. Mr. Dammeyer is a member of the executive committee of the general partner of Zell/Chilmark Fund, L.P. ("Zell/Chilmark"). Mr. Dammeyer was selected, effective December 15, 1992, by the Board of Directors to become a member of the Board to fill a vacancy. Talton R. Embry (49)............... Mr. Embry is a Director and is, and since 1978 has been, Magten Asset Management Managing Director and Chief Investment Officer of Magten Corporation Asset Management Corporation, which he established and 35 East 21st Street which is an investment advisory firm. Mr. Embry is also New York, NY 10010 a director of Capsure Holdings Corp., Varco International, Inc. ("Varco"), TSX Corporation, Combined Broadcasting, Inc., BDK Holdings, Inc., Termodyne Holdings Corp. and Anacomp, Inc. Mr. Embry and Mr. Zell were elected on July 27, 1992, as Co-Chairmen of the Board of Directors of Parent.
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NAME, AGE AND POSITION WITH PARENT; PRINCIPAL OCCUPATION OR BUSINESS ADDRESS EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY - ----------------------------------- -------------------------------------------------------- Ben Evans (67)..................... Mr. Evans is a Director and was a partner of Ernst & Ernst & Young Whinney, now Ernst & Young, until his retirement in 787 7th Avenue 1989. Mr. Evans was an audit partner supervising the 7th Floor audits of companies in many diverse industries with New York, NY 10019 heavy concentration in apparel, retailing and commercial finance. From 1978 through 1989, Mr. Evans was a member of Ernst & Whinney's corporate financial services group concentrating on bankruptcy assignments generally on behalf of unsecured creditors committees, with special emphasis in the apparel, retailing, food, drug and pharmaceutical industries. Since 1989, Mr. Evans has been a consultant for the firm of Ernst & Young in their corporate financial services group continuing work in the bankruptcy area. Mr. Evans is also a director of Kash n' Karry Food Stores, Inc. and Megafoods Stores, Inc. John V. Guttag (47)................ Dr. Guttag is a Director and is Professor of Computer Massachusetts Institute of Science and Engineering at the Massachusetts Institute Technology of Technology ("MIT"). Since his arrival at MIT in 1979, 545 Technology Square Dr. Guttag has headed the laboratory for Computer Cambridge, MA 02139 Science's Systematic Program Development Group and currently is Associate Department Head for Computer Science of the Electrical Engineering and Computer Science Department. Dr. Guttag is a member of the governing council of the School of Engineering and a member of the Executive Committee of the Laboratory for Computer Science at MIT. Dr. Guttag is also a director of INSO Corporation and the Computing Research Association. Dr. Guttag was selected, effective March 23, 1994, by the Board of Directors to become a member of the Board to fill a vacancy. Walter B. Reinhold (71)............ Mr. Reinhold is a Director and is Chairman of the Board Varco International, Inc. of Varco, a company engaged in the business of 743 North Eckhoff Street manufacturing oil and gas well drilling equipment and Orange, CA 92668 machinery, drilling rig instrumentation and blow out prevention equipment. He has been with Varco since 1949 and was Chief Executive Officer from 1979 to April 1991, and prior thereto he served as Executive Vice President of Varco. Mr. Reinhold is a standing member of the American Petroleum Institute, Stanford Associates, and the Society of Petroleum Engineers. He is a director of the Amdahl Corporation, the National Ocean Industries Association and the Petroleum Equipment Suppliers Association and a trustee for the City of Hope.
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NAME, AGE AND POSITION WITH PARENT; PRINCIPAL OCCUPATION OR BUSINESS ADDRESS EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY - ----------------------------------- -------------------------------------------------------- Sheli Z. Rosenberg (54)............ Ms. Rosenberg is a Director and is, and since 1994 has Rosenberg & Liebentritt, P.C. been, President and Chief Executive Officer, and since Two North Riverside Plaza 1980, a director and Executive Vice President of Equity Suite 1601 Financial and Management Company and Equity Group Chicago, IL 60606 Investments, Inc. Ms. Rosenberg is, and since 1980 has been, a member of Rosenberg & Liebentritt, P.C. Ms. Rosenberg is, and since 1991 has been, a director of American Classic Voyages Co. and Vice President and Assistant Secretary of American Classic Voyages Co. since 1990 and 1991, respectively; and is, and since 1985 has been, a director, Vice President and General Counsel of Capsure Holdings Corp. Ms. Rosenberg is also a director of Anixter, Jacor Communications, Inc. (where she serves as Chair), Falcon Building Products, Inc., Manufactured Home Communities, Inc., Sealy Corporation, and a trustee of Equity Residential Properties Trust. Ms. Rosenberg has been Vice President of First Capital Benefits Administrators, Inc. ("First Capital") since July 1987. First Capital filed a petition under the federal bankruptcy laws on January 3, 1995 which ultimately resulted in First Capital's liquidation on November 11, 1995. Ms. Rosenberg is a member of the executive committee of the general partner of Zell/Chilmark. Prior to October 4, 1991, Ms. Rosenberg was Vice President of Madison Management Group, Inc. which filed a petition under Chapter 11 of the Bankruptcy Code on November 8, 1991. Ms. Rosenberg was selected, effective March 23, 1994, by the Board of Directors to become a member of the Board to fill a vacancy. David M. Schulte (49).............. Mr. Schulte is a Director and is, and since mid-1990 has Chilmark Partners, L.P. been, one of two individuals (the other being Mr. Zell) Two North Riverside Plaza who act as general partners of the general partner of Suite 1500 Zell/Chilmark, a limited partnership with capital Chicago, IL 60606 commitments in excess of $1 billion formed to invest in and provide capital and management support to companies that are engaged in or are the appropriate subject of significant recapitalizations or corporation restructurings, both in and out of the bankruptcy process. Since 1984, Mr. Schulte has been managing general partner of Chilmark Partners, L.P., a merchant banking firm that has specialized in providing corporate and investment banking advice to companies on the restructuring of their business in conjunction with recapitalizations, although he currently devotes all of his time to the affairs of Zell/Chilmark. Mr. Schulte is also a director of Sealy Corporation.
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NAME, AGE AND POSITION WITH PARENT; PRINCIPAL OCCUPATION OR BUSINESS ADDRESS EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY - ----------------------------------- -------------------------------------------------------- Thomas O. Thorsen (64)............. Mr. Thorsen is a Director and has been a director of The 7790 Old Marsh Road Travelers Corporation, now known as The Travelers Group Palm Beach Gardens, FL 33418 ("Travelers"), a multiline insurance, financial and health services institution, since 1987. Prior to his retirement in May 1992, Mr. Thorsen was Vice Chairman of the Board of Travelers since 1990. He was Vice Chairman and Chief Financial Officer of Travelers from 1990 to 1991. Prior thereto, he was Executive Vice President and Chief Financial Officer from 1984 to 1990. Before joining Travelers, Mr. Thorsen served thirty-one years with General Electric Company in various financial positions, including Senior Vice President and Chief Financial Officer from 1980 to 1984. Mr. Thorsen is a director of Iowa Select Farms, Inc. and a member of the advisory committee of Iowa Select Farms, L.P., entities engaged in large scale hog production. He is also a director of PGA Golf Properties, Inc., an affiliate of the PGA of America involved in the development and ownership of golf facilities. Samuel Zell (54)................... Mr. Zell is a Director and is, and since 1981 has been, Equity Group Investments, Inc. Chairman of the Board of Equity Financial and Management Two North Riverside Plaza Company and, since 1986 has been Chairman of the Board Suite 600 of Equity Group Investments, Inc., two privately owned Chicago, IL 60606 affiliated investment and management companies; is, and since mid-1990 has been, the other individual (along with Mr. Schulte) who acts a general partner of the general partner of Zell/Chilmark; is, and since 1985 has been, Chairman of the Board of Anixter; is, and from 1987 has served as Chairman of the Board and Executive Officer of Capsure Holdings Corp.; is, and since 1993 has been, Chairman of the Board of Equity Residential Properties Trust; is Chairman of the Board and, from March 31, 1995 until August 13, 1996, had served as Chief Executive Officer, and from 1993 to March 31, 1995 had served as Co-Chairman of the Board, of Manufactured Home Communities, Inc. Mr. Zell is a member of the board of directors of American Classic Voyages Co. (where he has served as Chairman of the Board since August 1993), Sealy Corporation, Quality Food Centers, Inc., Ramco Energy plc, based in the United Kingdom, and Tele Tech Holdings, Inc. Prior to October 4, 1991, Mr. Zell was President of Madison Management Group, Inc., which filed a petition under Chapter 11 of the Bankruptcy Code on November 8, 1991. Mr. Zell and Mr. Embry were elected on July 27, 1992, as Co-Chair of the Board of Directors of Parent.
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NAME, AGE AND POSITION WITH PARENT; PRINCIPAL OCCUPATION OR BUSINESS ADDRESS EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY - ----------------------------------- -------------------------------------------------------- James P. Mastrian (54)............. Mr. Mastrian was elected Executive Vice President of Marketing of Parent in July 1994. From June 1992 to July 1994, Mr. Mastrian served as Senior Vice President, Marketing. From September 1990 to June 1992, Mr. Mastrian served as Vice President and General Manager, Marketing of Parent. From March 1990 to September 1990, Mr. Mastrian served as Executive Vice President of Milo Corp. From October 1989 to March 1990, Mr. Mastrian was President and Chief Operating Officer of SuperX Drug Company of Arizona. From July 1987 to October 1989, Mr. Mastrian was Senior Vice President, Merchandising and Marketing for the Sherwin-Williams Company Paint Stores Group. Before July 1987, Mr. Mastrian was employed by Gray Drug Fair, a division of Sherwin-Williams Company, and served as President and General Manager of Gray Drug Fair from prior to June 1986 to July 1987. Clarence D. Nichols (49)........... Mr. Nichols was elected Executive Vice President, Store and Real Estate, in July 1996. From June 1992 to July 1996, Mr. Nichols served as Senior Vice President, Store Operations. From November 1987 to June 1992, Mr. Nichols served as Regional Vice President for Parent's southern region. From August 1986 to November 1987, Mr. Nichols served as a regional merchandise manager for Parent. Brian P. Carney (35)............... Mr. Carney was elected Senior Vice President, Finance in May 1996. From June 1992 to May 1996, Mr. Carney served as Vice President and Controller of Parent. From October 1989 to June 1992, Mr. Carney served as Parent's director of general accounting. Prior to October 1989, Mr. Carney was a manager with the public accounting firm of Arthur Andersen & Co. (now known as Arthur Andersen LLP). Douglas W. Coffey (55)............. Mr. Coffey was elected Senior Vice President, Human Resources of Parent in July 1993. For five years prior to July 1993, Mr. Coffey served as Senior Vice President of Human Resources at Burdine's Department Stores, a division of Federated Department Stores. Wilson A. Lester, Jr. (45)......... Mr. Lester was elected Senior Vice President, Logistics for Parent in May 1996. From August 1995 to May 1996, Mr. Lester served as Vice President, Distribution and Transportation. From December 1993 to August 1995, Mr. Lester served as Senior Vice President of Logistics of Fabri-Centers of America, Inc. ("Fabri-Centers"). From June 1990 to December 1993, Mr. Lester served as Senior Vice President of Distribution for Phar-Mor, Inc.
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NAME, AGE AND POSITION WITH PARENT; PRINCIPAL OCCUPATION OR BUSINESS ADDRESS EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY - ----------------------------------- -------------------------------------------------------- William D. Russell (49)............ Mr. Russell was elected Senior Vice President, Real Estate in July 1996. From March 1996 to July 1996, Mr. Russell served as Senior Vice President of Development at The Sembler Co., in St. Petersburg, Florida. From prior to July 1991 to March 1996, Mr. Russell served as Vice President of Real Estate for Montgomery Ward. Bruce E. Schwallie (41)............ Mr. Schwallie was elected Senior Vice President, Marketing in May 1996. From March 1995 to May 1996, Mr. Schwallie served as Vice President, Marketing. From February 1991 until March 1995, Mr. Schwallie served in various capacities within the Parent's marketing department, most recently as divisional merchandise manager. From September 1990 until January 1991, Mr. Schwallie was employed by RDS Acquisition Corp. in Phoenix, Arizona, where he served as director of merchandising. Jack A. Staph (51)................. Mr. Staph has been Parent's Senior Vice President, Secretary and General Counsel since December 1986 and served as a member of the interim office of the President of Parent from June 1992 to July 1992. Mr. Staph had been continuously employed as a member of Parent's in-house legal staff for more than ten years prior to June 1986. George T. Watt (52)................ Mr. Watt was elected Senior Vice President, Managed Care in May 1996. From August 1995 to May 1996, Mr. Watt served as Vice President, Managed Care. Mr. Watt served as a Vice President of Parent from August 1994 until August 1995. From November 1986 until August 1994, Mr. Watt was employed by Thrift Drug Corporation, where he served as Vice President of Sales and Client Service for Thrift Drug's subsidiary, TDI Managed Care Services, Inc. Dante R. Barone (52)............... Mr. Barone was elected Vice President, Pharmacy Marketing of Parent in May 1989. From March 1988 to May 1989, Mr. Barone served as divisional Vice President of Pharmacy Marketing for Parent. From prior to June 1986 to March 1988, Mr. Barone was senior buyer for Walgreen Drug Co. Charles W. Breckenridge (54)....... Mr. Breckenridge was elected Vice President, Control Support Services of Parent in June 1992. Mr. Breckenridge served as Parent's director of internal audit from August 1989 to June 1992. From February 1986 to August 1989, Mr. Breckenridge served as director of business investigation services at the public accounting firm of Coopers & Lybrand. Richard M. Mergo (51).............. Mr. Mergo was elected Vice President, Store Operations of Parent in March 1995. Mr. Mergo served as a regional Vice President for Parent from 1986 to March 1995.
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NAME, AGE AND POSITION WITH PARENT; PRINCIPAL OCCUPATION OR BUSINESS ADDRESS EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY - ----------------------------------- -------------------------------------------------------- Carl E. Palmiter (43).............. Mr. Palmiter was elected Vice President, Advertising of Parent in July 1996. From July 1994 to June 1996, Mr. Palmiter served as Director of Advertising of Parent. From prior to 1991 to July 1994, Mr. Palmiter was employed by Hook-SupeRx, Inc. ("HSI"), where he served as Assistant Vice President of advertising at the time of the Parent's acquisition of HSI. Robert T. Raaf (50)................ Mr. Raaf assumed duties as Vice President, Taxes of Parent in July 1994. From July 1993 to July 1994, Mr. Raaf served as Vice President and Treasurer of Parent. From September 1989 to July 1993, Mr. Raaf was Vice President, Tax of Parent. For more than three years prior to September 1989, Mr. Raaf was a tax partner with the public accounting firm of Arthur Andersen & Co. (now known as Arthur Andersen LLP). Jay E. Ross (44)................... Mr. Ross was elected Vice President, Merchandising of Parent in March 1995. Mr. Ross has been continuously employed by Parent since 1969, most recently as director of merchandising. Robert A. Tamplin (49)............. Mr. Tamplin was elected Vice President, Store Operations of Parent in March 1995. Mr. Tamplin has been continuously employed by Parent for more than 25 years, most recently as a regional Vice President. Robert I. Thompson (43)............ Mr. Thompson was elected Vice President, Professional Operations of Parent in August 1995, and currently is responsible for the Parent's pharmacy operations under the title Vice President, Pharmacy Operations. Mr. Thompson has been continuously employed by Parent since 1978, most recently as regional director of pharmacy operations. Hanley H. Wheeler, III (37)........ Mr. Wheeler was elected Vice President, Store Operations of Parent in August 1995. Mr. Wheeler has been continuously employed by Parent since 1981, most recently as regional director of operations. Joseph E. Williams (42)............ Mr. Williams was elected Vice President, Controller of Parent in July 1996. From October 1992 to June 1996, Mr. Williams served as Controller for The Limited Stores, Inc. From prior to 1991 to July 1992, Mr. Williams served as Senior Vice President and Controller for Fabri-Centers. Paul N. Harris (38)................ Mr. Harris was elected Assistant Secretary of Parent in July 1993. From prior to May 1989 to July 1993, Mr. Harris served as senior counsel for Parent. Gregory G. Wilson (47)............. Mr. Wilson was elected Assistant Controller of Parent in June 1992. From February 1988 to June 1992, Mr. Wilson served as director of financial planning and analysis for Parent, and from prior to June 1986 to February 1988, he served as director of investor relations for Parent.
S-8 41 DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER The name, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of the Purchaser are set forth below. The business address of each such director and executive officer is RDS Acquisition Inc., in care of Revco D.S., Inc., 1925 Enterprise Parkway, Twinsburg, OH 44087. All such directors and executive officers listed below are citizens of the United States.
NAME, AGE AND POSITION WITH THE PURCHASER; PRINCIPAL OCCUPATION OR BUSINESS ADDRESS EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY - ----------------------------------- -------------------------------------------------------- D. Dwayne Hoven (55)............... Mr. Hoven is a Director and President of the Purchaser. Mr. Hoven is a Director and was elected Chief Executive Officer of Parent effective August 1993 and was elected President of the Company in July 1992. From July 1992 to August 1993, Mr. Hoven served as Chief Operating Officer of Parent. From December 1991 to July 1992, Mr. Hoven served as Executive Vice President, Marketing and Stores for Parent. From June 1992 to July 1992, Mr. Hoven served as a member of the interim office of the President of Parent. From July 1989 to December 1991, Mr. Hoven served as Executive Vice President of Stores for Parent. From January 1988 to June 1989, Mr. Hoven served as Senior Vice President of Distribution for Parent. Mr. Hoven is also a director of OfficeMax, Inc. Mr. Hoven was selected, effective August 27, 1992, by the Board of Directors to become a member of the Board to fill a vacancy. Carl A. Bellini (62)............... Mr. Bellini is a Director of the Purchaser. Mr. Bellini is a Director and was elected Executive Vice President and Chief Operating Officer of Parent on October 13, 1993. From August 18, 1992 to October 13, 1993, Mr. Bellini served as Executive Vice President of Marketing and Stores for Parent. From approximately December 1991 to April 1992, Mr. Bellini served as Acting Chief Operating Officer of Standard Brands Paint Co., which filed a bankruptcy proceeding in March 1992 and emerged from bankruptcy during 1993. From June 1989 until June 1991, Mr. Bellini served as President and Chief Operating Officer of Erol's, Inc., a video and electronics chain based in Washington, D.C. From December 1987 to June 1989, Mr. Bellini served as Executive Vice President of Store Operations for Parent. Mr. Bellini was selected, effective August 1, 1994, by the Board of Directors to become a member of the Board to fill a vacancy. Jack A. Staph (51)................. Mr. Staph is a Director and Vice President and Secretary of the Purchaser. Mr. Staph has been Parent's Senior Vice President, Secretary and General Counsel since December 1986 and served as a member of the interim office of the President of Parent from June 1992 to July 1992. Mr. Staph had been continuously employed as a member of Parent's in-house legal staff for more than ten years prior to June 1986.
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NAME, AGE AND POSITION WITH THE PURCHASER; PRINCIPAL OCCUPATION OR BUSINESS ADDRESS EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY - ----------------------------------- -------------------------------------------------------- Brian P. Carney (35)............... Mr. Carney is Treasurer of the Purchaser. Mr. Carney was elected Senior Vice President, Finance of Parent in May 1996. From June 1992 to May 1996, Mr. Carney served as Vice President and Controller of Parent. From October 1989 to June 1992, Mr. Carney served as Parent's director of general accounting. Prior to October 1989, Mr. Carney was a manager with the public accounting firm of Arthur Andersen & Co. (now known as Arthur Andersen LLP).
S-10 43 SCHEDULE II RECENT SHARE PURCHASES BY THE PURCHASER Between August 13 and September 6, 1996, Purchaser purchased in open market transactions, including block trades, a total of 1,190,000 Shares (representing approximately 6.4% of the outstanding Shares) at prices, including brokers' commissions, ranging from $10 3/4 to $12 5/8 as follows: RECENT TRANSACTIONS IN SHARES
PURCHASE DATE NUMBER OF SHARES PRICE PER SHARE - -------------- ---------------- --------------- August 13 350,000 $10 15/16 August 13 60,000 $11 August 14 115,000 $11 1/8 August 15 25,000 $11.40 August 15 50,000 $11 19/32 August 15 25,000 $11 7/16 August 16 25,000 $11 1/4 August 19 175,000 $11 5/16 August 20 25,000 $11 3/8 August 21 40,000 $11 3/8 September 3 12,500 $10 3/4 September 3 12,500 $10 3/4 September 4 45,000 $11 1/4 September 4 60,000 $11 1/2 September 5 35,000 $11 3/4 September 5 40,000 $11 3/4 September 5 5,000 $12 September 6 35,000 $12 1/4 September 6 25,000 $12 1/2 September 6 25,000 $12 9/16 September 6 5,000 $12 5/8
On August 19, Hanley H. Wheeler, III, Vice President, Store Operations of Parent, sold 1,000 Shares in an open market transaction for $11 1/8 per share. S-11 44 Manually signed copies of the Letter of Transmittal (or copies thereof) will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each stockholder of the Company or such stockholder's broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of its addresses set forth below. The Depositary for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. By Mail By Hand or Overnight Delivery: ChaseMellon Shareholder Services, L.L.C. ChaseMellon Shareholder Services, L.L.C. Reorganization Department Reorganization Department P.O. Box 798 120 Broadway Midtown Station 13th Floor New York, NY 10018 New York, NY 10271
By Fax Transmission: (201) 329-8936 For Fax Confirmation Only by Telephone: (201) 296-4209 ------------------------ Questions and requests for assistance may be directed to the Dealer Manager or the Information Agent at their respective addresses or telephone numbers set forth below. Additional copies of this Offer to Purchase, the Letter of Transmittal and all other tender offer materials may be obtained from the Information Agent or the Dealer Manager as set forth below, and will be furnished promptly at the Purchaser's expense. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: D.F. KING & CO., INC. 77 Water Street New York, NY 10005 Bankers and Brokers Call Collect: (212) 269-5550 Call Toll Free: (800) 488-8075 The Dealer Manager for the Offer is: SALOMON BROTHERS INC Seven World Trade Center New York, NY 10048 Call Collect: (212) 783-5141 EX-99.A2 3 LETTER OF TRANSMITTAL 1 LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF BIG B, INC. PURSUANT TO THE OFFER TO PURCHASE DATED SEPTEMBER 10, 1996 BY RDS ACQUISITION INC., a Wholly Owned Subsidiary of REVCO D.S., INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, OCTOBER 7, 1996, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: ChaseMellon Shareholder Services, L.L.C. By Mail By Hand or Overnight Delivery: ChaseMellon Shareholder Services, L.L.C. ChaseMellon Shareholder Services, L.L.C. Reorganization Department Reorganization Department P.O. Box 798 120 Broadway Midtown Station 13th Floor New York, NY 10018 New York, NY 10271
By Fax Transmission: (201) 329-8936 For Fax Confirmation Only by Telephone: (201) 296-4209 ------------------------ DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FAX TRANSMISSION OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED BELOW. 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 by securityholders of Big B, Inc. (the "Company") either if certificates ("Certificates") evidencing Shares (as defined below) or Convertible Debentures (as defined below) are to be forwarded herewith or if delivery of Shares is to be made by book-entry transfer to the account of ChaseMellon Shareholder Services, L.L.C. (the "Depositary") at The Depository Trust Company or Philadelphia Depository Trust Company (each, a "Book-Entry Transfer Facility" and collectively, the "Book-Entry Transfer Facilities") pursuant to the book-entry transfer procedures described in the section entitled "The Tender Offer--Procedures for Tendering Shares" of the Offer to Purchase (as defined below). Delivery of documents to a Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures does not constitute delivery to the Depositary. Securityholders whose Certificates are not immediately available or who cannot deliver their Certificates and all other documents required hereby to the Depositary prior to the Expiration Date (as defined in the Offer to Purchase) or who cannot complete the procedures for delivery by book-entry transfer on a timely basis and who wish to tender their Shares must do so pursuant to the guaranteed delivery procedures described in the section entitled "The Tender Offer--Procedures for Tendering Shares" of the Offer to Purchase. See Instruction 2. 2 / / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING: Name of Tendering Institution: Check box of Applicable Book-Entry Transfer Facility: / / The Depository Trust Company / / Philadelphia Depository Trust Company Account Number Transaction Code Number / / 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): Date of Execution of Notice of Guaranteed Delivery: Name of Institution which Guaranteed Delivery: If Delivered by Book-Entry Transfer, Check Box of Applicable Book-Entry Transfer Facility: / / The Depository Trust Company / / Philadelphia Depository Trust Company Account Number Transaction Code Number - -------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED
- ------------------------------------------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) CERTIFICATE(S) AND SHARE(S) TENDERED APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY) - ------------------------------------------------------------------------------------------------------------------------------ TOTAL NUMBER OF SHARES NUMBER OF CERTIFICATE EVIDENCED BY SHARES NUMBER(S)(1) CERTIFICATE(S)(1)(2) TENDERED(2) TOTAL SHARES OF COMMON STOCK
- -------------------------------------------------------------------------------- (1) Need not be completed by stockholders delivering Shares by book-entry transfer. (2) Includes whole Shares to be received upon conversion of Convertible Debentures if Certificates for Convertible Debentures are being delivered to tender such Shares. Unless otherwise indicated, it will be assumed that all Shares evidenced by each Certificate for Shares (and all whole Shares to be received upon conversion of Convertible Debentures evidenced by each Certificate for Convertible Debentures) are being tendered. See Instruction 4. - -------------------------------------------------------------------------------- 3 NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to RDS Acquisition Inc., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Revco D.S., Inc., a Delaware corporation, the above-described shares of Common Stock, par value $0.001 per share (the "Shares"), of Big B, Inc., an Alabama corporation (the "Company"), pursuant to Purchaser's offer to purchase any and all outstanding Shares at a price of $15 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated September 10, 1996 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with any supplements or amendments from time to time hereto or thereto, collectively constitute the "Offer"). The undersigned understands that the Purchaser reserves the right to transfer or assign, in whole or at any time in part from time to time, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or 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. Subject to, and effective upon, acceptance for payment of, the Shares tendered herewith, in accordance with the terms of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to, or upon the order of, the Purchaser all right, title and interest in and to all the Shares that are being tendered hereby (and any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after September 10, 1996 (collectively, "Distributions")), and irrevocably 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 (a) deliver Share Certificates evidencing such Shares and all Distributions, or transfer ownership of such Shares and all Distributions on the account books maintained by a Book-Entry Transfer Facility together, in either case, with all accompanying evidence of transfer and authenticity, to or upon the order of the Purchaser, (b) present such Shares and all Distributions for transfer on the Company's books and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares and all Distributions, all in accordance with the terms of the Offer. By executing this Letter of Transmittal, the undersigned irrevocably appoints Jack A. Staph, Brian P. Carney and Paul N. Harris as attorneys-in-fact and proxies of the undersigned, each with full power of substitution, to the full extent of the undersigned's rights with respect to the Shares tendered by the undersigned and accepted for payment by the Purchaser (and any and all Distributions). All such attorneys-in-fact and proxies shall be considered coupled with 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 powers of attorney and proxies given by the undersigned with respect to such Shares and other securities will, without further action, be revoked, and no subsequent proxies may be given. The individuals named above as attorneys-in-fact and proxies 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 the undersigned as they in their sole discretion may deem proper at any annual, special, adjourned or postponed meeting of the Company's shareholders, 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. 4 If the undersigned is tendering Shares by the delivery of Certificates for the Company's 6.5% Convertible Subordinated Debentures Due 2003 ("Convertible Debentures"), in addition to the matters described above, the undersigned hereby irrevocably appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to the full extent of the undersigned's rights with respect to such Convertible Debentures, (a) to convert Convertible Debentures represented by such Certificates into the Shares being tendered, (b) to cause the transfer of record ownership of such Convertible Debentures into the name of the undersigned or the Depositary if deemed by the Depositary or the Purchaser to be necessary or appropriate to convert such Convertible Debentures into the Shares being tendered and (c) to receive the Shares issuable upon conversion of such Convertible Debentures and any cash in lieu of fractional Shares payable upon such conversion. This appointment will be effective if, when and only to the extent that, the Purchaser accepts such Shares for payment pursuant to the Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby and all Distributions (including Shares and Distributions to be received upon conversion of Convertible Debentures on behalf of the undersigned) and that when the same are accepted for payment by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title thereto and to all Distributions, free and clear of all liens, restrictions, charges and encumbrances, and that none of such Shares and Distributions will be subject to any adverse claim. The undersigned, upon request, shall execute and deliver all additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby and all Distributions. In addition, the undersigned shall remit and transfer promptly to the Depositary for the account of the Purchaser all Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer, and, pending such remittance and transfer or appropriate assurance thereof, the Purchaser shall be entitled to all rights and privileges as owner of each such Distribution and may withhold the entire purchase price of the Shares tendered hereby or deduct from such purchase price, the amount or value of such Distribution as determined by the Purchaser in its sole discretion. If the undersigned is tendering Shares by the delivery of Certificates for Convertible Debentures, the undersigned, upon request, shall execute and deliver all additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to effectuate the conversion of such Convertible Debentures into the Shares tendered hereby, including, without limitation, such documents as shall be necessary to effect the transfer of record ownership of such Convertible Debentures into the name of the undersigned or the Depositary. 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. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned understands that tenders of Shares pursuant to any one of the procedures described in the section entitled "The Tender Offer--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 Shares tendered pursuant to the Offer will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions of 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. 5 Unless otherwise indicated herein in the box entitled "Special Payment Instructions", please issue the check for the purchase price of all Shares purchased (and if the undersigned is tendering Shares by the delivery of Certificates for Convertible Debentures, the check for any cash in lieu of fractional Shares received upon conversion of such Convertible Debentures), and return all Certificates evidencing Shares not tendered or not purchased (and Certificates evidencing Convertible Debentures convertible into Shares not tendered or not purchased), in the name(s) of the registered holder(s) appearing above under "Description of Shares Tendered". Similarly, unless otherwise indicated in the box entitled "Special Delivery Instructions", please mail the check for the purchase price of all Shares purchased (and if the undersigned is tendering Shares by the delivery of Certificates for Convertible Debentures, the check for any cash in lieu of fractional Shares received upon conversion of such Convertible Debentures) and all Certificates evidencing Shares not tendered or not purchased (and Certificates evidencing Convertible Debentures convertible into Shares not tendered or not purchased) (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing above under "Description of Shares Tendered". In the event that the boxes entitled "Special Payment Instructions" and "Special Delivery Instructions" are both completed, please issue the check for the purchase price of all Shares purchased (and if the undersigned is tendering Shares by the delivery of Certificates for Convertible Debentures, the check for any cash in lieu of fractional Shares received upon conversion of such Convertible Debentures) and return all Certificates evidencing Shares not tendered or not purchased (and Certificates evidencing Convertible Debentures convertible into Shares not tendered or not purchased) in the name(s) of, and mail such check(s) and Certificates to the person(s) so indicated. Unless otherwise indicated herein in the box entitled "Special Payment Instructions", please credit any Shares tendered hereby and delivered by book-entry transfer, but which are not purchased, by crediting the account at the Book-Entry Transfer Facility designated above. The undersigned recognizes that the Purchaser has no obligation, pursuant to the Special Payment Instructions, to transfer any Shares (or convert or transfer any Convertible Debentures) from the name of the registered holder(s) thereof if the Purchaser does not accept for payment any of the Shares tendered hereby. 6 / / CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES (OR CONVERTIBLE DEBENTURES) THAT YOU OWN HAVE BEEN LOST OR DESTROYED AND SEE INSTRUCTION 10. Number of Shares (or number of Shares to be received upon conversion of Convertible Debentures) represented by the lost or destroyed certificates: SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of the Shares purchased (and if the undersigned is tendering Shares by the delivery of Certificates for Convertible Debentures, the check for any cash in lieu of fractional Shares received upon conversion of such Convertible Debentures) or Certificates evidencing the Shares not tendered or not purchased (or Certificates evidencing Convertible Debentures convertible into the Shares not tendered or not purchased) are to be issued in the name of someone other than the undersigned, or if the Shares tendered hereby and delivered by book-entry transfer which are not purchased are to be returned by credit to an account at one of the Book-Entry Transfer Facilities other than that designated above. Issue: / / Check / / Certificate(s) to: Name (Please Print) Address - ------------------------------------------------------ (Include Zip Code) - ------------------------------------------------------ (Taxpayer Identification or Social Security Number) / / Credit Shares delivered by book-entry transfer and not purchased to the account set forth below: Check appropriate box: / / The Depository Trust Company / / Philadelphia Depository Trust Company Account Number SIGN HERE (ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW) (SIGNATURE(S) OF HOLDER(S)) Dated: _________________ , 1996 (MUST BE SIGNED BY REGISTERED HOLDER(S) AS NAME(S) APPEAR(S) ON THE CERTIFICATE(S) OR ON A SECURITY POSITION LISTING OR BY PERSON(S) AUTHORIZED TO BECOME REGISTERED HOLDER(S) BY CERTIFICATES AND DOCUMENTS TRANSMITTED HEREWITH. IF SIGNATURE IS BY TRUSTEES, EXECUTORS, ADMINISTRATORS, GUARDIANS, ATTORNEYS-IN-FACT, OFFICERS OF CORPORATIONS OR OTHERS ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE PROVIDE THE FOLLOWING INFORMATION. SEE INSTRUCTION 5.) Name(s) (PLEASE PRINT) Capacity (Full title) Address (INCLUDE ZIP CODE) Area Code and Telephone Number ( ) Taxpayer Identification or Social Security Number (SEE SUBSTITUTE FORM W-9) GUARANTEE OF SIGNATURE(S) (IF REQUIRED--SEE INSTRUCTIONS 1 AND 5) Authorized Signature Name (PLEASE PRINT) Name of Firm Address (INCLUDE ZIP CODE) Area Code and Telephone Number ( ) Dated: _________________ , 1996 SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares purchased (and if the undersigned is tendering Shares by the delivery of Certificates for Convertible Debentures, the check for any cash in lieu of fractional Shares received upon conversion of such Convertible Debentures) or Certificates evidencing the Shares not tendered or not purchased (or Certificates evidencing Convertible Debentures convertible into the Shares not tendered or not purchased) are to be mailed to someone other than the undersigned, or to the undersigned at an address other than that shown under "Description of Shares Tendered". Mail / / Check / / Certificate(s) to: Name (Please Print) Address - -------------------------------------------------------------------------------- (Include Zip Code) - -------------------------------------------------------------------------------- (Taxpayer Identification or Social Security Number) 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this Letter of Transmittal if (a) this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this document, includes any participant in any of the Book-Entry Transfer Facilities' systems whose name appears on a security position listing as the owner of Shares) of any of the Shares tendered herewith and such registered holder(s) has not completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" above or (b) such Shares are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that 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"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 5. If Certificates evidencing Shares or Convertible Debentures are registered in the name of a person other than the signer of this Letter of Transmittal, or if payment is to be made or Certificates relating to tendered Shares not accepted for payment are to be returned to a person other than the registered holder of the Certificates surrendered, the tendered Certificate must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or name(s) of the registered holders or owners appear on the Certificate, with the signatures on such Certificate or stock powers guaranteed as aforesaid. See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of Transmittal is to be used either if Certificates evidencing Shares or Convertible Debentures are to be forwarded herewith or if Shares are to be delivered by book-entry transfer pursuant to the procedure set forth in the section entitled "The Tender Offer--Procedures for Tendering Shares" of the Offer to Purchase. Certificates evidencing all tendered Shares (or Certificates evidencing Convertible Debentures convertible into all tendered Shares), or confirmation of a book-entry transfer of such Shares (a "Book-Entry Confirmation"), if such procedure is available, into the Depositary's account at one of the Book-Entry Transfer Facilities pursuant to the procedures set forth in the section entitled "The Tender Offer--Procedures for Tendering Shares" of the Offer to Purchase, together with a properly completed and duly executed Letter of Transmittal (or copy thereof) with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message, as defined below) and any other required documents, must be received by the Depositary at one of its addresses set forth on the back cover hereof prior to the Expiration Date. If Certificates evidencing Shares or Convertible Debentures are forwarded to the Depositary in multiple deliveries, a properly completed and duly executed Letter of Transmittal must accompany each such delivery. Securityholders whose Certificates are not immediately available, who cannot deliver their Certificates and all other required documents to the Depositary prior to the Expiration Date or who cannot complete the procedures for delivery by book-entry transfer on a timely basis may tender Shares pursuant to the guaranteed delivery procedures described in the section entitled "The Tender Offer--Procedures for Tendering Shares" of the Offer to Purchase. Pursuant to such procedures: (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 herewith, must be received by the Depositary prior to the Expiration Date; and (iii) the Certificates evidencing all tendered Shares (or Certificates evidencing Convertible Debentures convertible into all tendered Shares), in proper form for transfer, or a confirmation of a book-entry transfer of such Shares, if such procedures are available, into the Depositary's account at one of the Book-Entry Transfer Facilities, together with a properly completed and duly executed Letter of Transmittal (or copy thereof) with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message), and any other required documents, must be received by the Depositary within three trading days after the date of execution of the Notice of Guaranteed Delivery, all as described in the section entitled "The Tender Offer--Procedures for Tendering Shares" of the Offer to Purchase. A "trading day" is any day on which the Nasdaq National Market is open for business. The term "Agent's Message" means a message, transmitted by a Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Facility tendering the Shares that such participant has received and agrees to be bound by the terms of this Letter of Transmittal and that the Purchaser may enforce such agreement against the participant. 8 THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, CERTIFICATES EVIDENCING SHARES OR CONVERTIBLE DEBENTURES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY 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. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. By execution of this Letter of Transmittal (or a copy hereof), all tendering securityholders waive any right to receive any notice of the acceptance of their Shares for payment. 3. INADEQUATE SPACE. If the space provided herein under "Description of Shares Tendered" is inadequate, the Certificate numbers, the number of Shares evidenced by such Certificates (or the number of Shares to be received upon conversion of Convertible Debentures evidenced by such Certificate) and the number of Shares tendered should be listed on a separate schedule and attached hereto. 4. PARTIAL TENDERS. (Not applicable to stockholders who tender by book-entry transfer.) If fewer than all the Shares evidenced by any Certificate (or if fewer than all the whole Shares to be received upon conversion of Convertible Debentures evidenced by any Certificate) delivered to the Depositary herewith are to be tendered hereby, fill in the number of Shares that are to be tendered in the box entitled "Number of Shares Tendered". In such cases, new Certificate(s) evidencing the remainder of the Shares (or Debentures) that were evidenced by the Certificates delivered to the Depositary herewith will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the box entitled "Special Delivery Instructions", as soon as practicable after the expiration or termination of the Offer. All Shares evidenced by Certificates (and all whole Shares to be received upon conversion of Convertible Debentures evidenced by 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 holder(s) of the Shares tendered hereby (or the Convertible Debentures that are convertible into the Shares tendered hereby), the signature(s) must correspond with the name(s) as written on the face of the Certificate(s) without any alteration, enlargement or change whatsoever. If any Share tendered hereby (or any Convertible Debenture that is convertible into any Share tendered hereby) is owned of record by two or more persons, all such persons must sign this Letter of Transmittal. If any of the Shares tendered hereby (or any Convertible Debenture that is convertible into any Share tendered hereby) are registered in the names of different holders, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of such Shares. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby (or any Convertible Debentures that are convertible into any Shares tendered hereby), no endorsements of Certificates or separate stock powers are required, unless payment is to be made to, or Certificates evidencing Shares (or Convertible Debentures that are convertible into Shares) not tendered or not purchased are to be issued in the name of a person other than the registered holder(s), in which case the Certificate(s) evidencing the Shares tendered hereby (or the Convertible Debentures that are convertible into the Shares tendered hereby) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appears(s) on such Certificate(s). Signatures on such Certificate(s) and stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares tendered hereby (or any Convertible Debentures that are convertible into Shares tendered hereby), the Certificate(s) evidencing such Shares (or Convertible Debentures) 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 such Certificate(s). Signatures on such Certificate(s) and stock powers must be guaranteed by an Eligible Institution. 9 If this Letter of Transmittal or any Certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to Purchaser of such person's authority so to act must be submitted. 6. STOCK TRANSFER TAXES. Except as provided in this Instruction 6, the Purchaser will pay all stock transfer taxes with respect to the transfer and sale of 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 if Certificates evidencing Shares not tendered or not purchased (or Certificates evidencing Convertible Debentures convertible into Shares not tendered or not purchased) are to be issued in the name of, a person other than the registered holder(s), the amount of any transfer taxes (whether imposed on the registered owner(s), such other person or otherwise) payable on account of the transfer to such other person will be deducted from the purchase price of such Shares purchased, unless satisfactory evidence to the Purchaser of the payment of such taxes or exemption therefrom, is submitted. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES EVIDENCING THE SHARES TENDERED HEREBY (OR THE CERTIFICATES EVIDENCING CONVERTIBLE DEBENTURES CONVERTIBLE INTO THE SHARES TENDERED HEREBY). 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase price of any Shares tendered hereby (or if Shares are tendered by the delivery of Certificates for Convertible Debentures, a check for any cash in lieu of fractional Shares received upon conversion of such Convertible Debentures) is to be issued, or Certificate(s) evidencing Shares not tendered or not purchased (or Convertible Debentures convertible into Shares not tendered or not purchased) are to be issued, in the name of a person other than the person(s) signing this Letter of Transmittal or if any such check or any such Certificate is to be sent to someone other than the person(s) signing this Letter of Transmittal or to the person(s) signing this Letter of Transmittal but to an address other than that shown in the box entitled "Description of Shares Tendered", the appropriate boxes on this Letter of Transmittal must be completed. Stockholders delivering Shares tendered hereby by book-entry transfer may request that Shares not purchased be credited to such account maintained at a Book-Entry Transfer Facility as such stockholder may designate in the box entitled "Special Payment Instructions" on the reverse hereof. If no such instructions are given, all such Shares not purchased will be returned by crediting the account at the Book-Entry Transfer Facility designated on the reverse hereof as the account from which such Shares were delivered. 8. 31% BACKUP WITHHOLDING. In order to avoid backup withholding of Federal income tax on payments of cash pursuant to the Offer, a securityholder tendering Shares in the Offer must, unless an exemption applies, provide the Depositary with such holder's correct taxpayer identification number (i.e., social security number or employer identification number) ("TIN") on the Substitute Form W-9 below in this Letter of Transmittal and certify under penalties of perjury that such TIN is correct and that such holder is not subject to backup withholding. If a holder does not provide such holder's correct TIN or fails to provide the certifications described above, the Internal Revenue Service (the "IRS") may impose a $50 penalty on such holder and payment of cash to such holder pursuant to the Offer may be subject to backup withholding of 31%. Backup withholding is not an additional income tax. Rather, the amount of the backup withholding may be credited against the Federal income tax liability of the person subject to the backup withholding, provided that the required information is given to the IRS. If backup withholding results in an overpayment of tax, a refund may be obtained by the holder upon filing an income tax return. The securityholder is required to give the Depositary the TIN of the record holder of the Shares (or in the case of Shares to be received upon conversion of Convertible Debentures, the record holder of the Convertible Debentures). If the Shares (or Convertible Debentures) are held in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. 10 The box in Part 3 of Substitute Form W-9 may be checked if the tendering securityholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the securityholder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Depositary will withhold 31% on all payments made prior to the time a properly certified TIN is provided to the Depositary. However, such amounts will be refunded to such securityholder if a TIN is provided to the Depositary within 60 days. Certain securityholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Noncorporate foreign securityholders must complete and sign a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. 9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance may be directed to Salomon Brothers Inc, the Dealer Manager, or to D.F. King & Co., Inc., the Information Agent, 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, the Notice of Guaranteed Delivery and other related materials may be obtained from the Information Agent or the Dealer Manager or from brokers, dealers, commercial banks and trust companies. 10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s) representing Shares (or Convertible Debentures) has been lost, destroyed or stolen, the securityholder should promptly notify the Depositary by checking the box immediately preceding the special payment/special delivery instructions and indicating the number of Shares (or the number of Shares to be received upon conversion of any Convertible Debentures) so lost, destroyed or stolen. The securityholder will then be instructed by the Depositary as to the steps that must be taken in order to replace the certificate. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, destroyed or stolen certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A COPY HEREOF), PROPERLY COMPLETED AND DULY EXECUTED, WITH ANY REQUIRED SIGNATURE GUARANTEES (TOGETHER WITH CERTIFICATES FOR SHARES OR CONVERTIBLE DEBENTURES OR CONFIRMATION OF BOOK-ENTRY TRANSFER), AND ALL OTHER REQUIRED DOCUMENTS OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE). 11 PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. - -------------------------------------------------------------------------------- SUBSTITUTE PART 1-- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. Social Security FORM W-9 Number(s) DEPARTMENT OF THE TREASURY OR INTERNAL REVENUE SERVICE Employer Identification Number(s) ---------------------------------------------------------------- PAYER'S REQUEST PART 2--Certification--Under penalty of perjury, I certify that: PART 3-- FOR TAXPAYER (1) the number shown on this form is my correct Taxpayer Awaiting TIN IDENTIFICATION NUMBER Identification Number (or I am waiting for a number to be / / (TIN) issued to me) and (2) I am not subject to backup withholding because (a) I am exempt from backup withholding or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends or (c) the IRS has notified me that I am no longer subject to backup withholding. --------------------------- PART 4-- Exempt / / ---------------------------------------------------------------------------------------------- CERTIFICATION INSTRUCTIONS--You must cross out item (2) in Part 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 returns. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out such item (2). If you are exempt from backup withholding, check the box in Part 4 above.
- -------------------------------------------------------------------------------- Signature Date __________ , 1996 - -------------------------------------------------------------------------------- YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalty of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that, if I do not provide a taxpayer identification number to the Depositary, 31% of all reportable payments made to me will be withheld, but will be refunded if I provide a certified taxpayer identification number within 60 days. , 1996 Signature Date
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 INFORMATION. 12 The Information Agent for the Offer is: D.F. KING & CO., INC. 77 Water Street New York, NY 10005 Bankers and Brokers Call Collect: (212) 269-5550 Call Toll Free: (800) 488-8075 The Dealer Manager for the Offer is: SALOMON BROTHERS INC Seven World Trade Center New York, NY 10048 Call Collect: (212) 783-5141 EX-99.A3 4 NOTICE OF GUARANTEED DELIVERY 1 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK OF BIG B, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00, MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, OCTOBER 7, 1996, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE") As set forth in the section entitled "The Tender Offer--Procedures for Tendering Shares" of the Offer to Purchase (as defined below), and in Instruction 2 of the related Letter of Transmittal, this Notice of Guaranteed Delivery, or one substantially in the form hereof, must be used to accept the Offer if (i) certificates evidencing shares of Common Stock, par value $0.001 per share (the "Shares"), of Big B, Inc., an Alabama corporation (the "Company") (or certificates evidencing the Company's 6.5% Convertible Subordinated Debentures Due 2003 ("Convertible Debentures") that are convertible into Shares to be tendered), are not immediately available, (ii) time will not permit all required documents to reach ChaseMellon Shareholder Services, L.L.C. (the "Depositary"), prior to the Expiration Date or (iii) the procedures for book-entry transfer cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be delivered by hand or transmitted by fax or mail to the Depositary. See the section entitled "The Tender Offer--Procedures for Tendering Shares" of the Offer to Purchase. All capitalized terms used but not defined herein shall have the meaning ascribed to them in the Offer to Purchase. The Depositary for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. By Mail By Hand or Overnight Delivery: ChaseMellon Shareholder Services, L.L.C. ChaseMellon Shareholder Services, L.L.C. Reorganization Department Reorganization Department P.O. Box 798 120 Broadway Midtown Station 13th Floor New York, NY 10018 New York, NY 10271
By Fax Transmission: (201) 329-8936 For Fax Confirmation Only by Telephone: (201) 296-4209 ------------------------ DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FAX TRANSMISSION OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an Eligible Institution (as defined below) under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. 2 LADIES AND GENTLEMEN: The undersigned hereby tenders to RDS Acquisition Inc., a Delaware corporation (the "Purchaser"), upon the terms and subject to the conditions set forth in the Offer to Purchase dated September 10, 1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any supplements or amendments from time to time thereto, collectively constitute the "Offer"), receipt of which is hereby acknowledged, the number of Shares specified below pursuant to the guaranteed delivery procedures set forth in the section entitled "The Tender Offer--Procedures for Tendering Shares" of the Offer to Purchase. Number of Shares: Dated: , 1996 ------------------------------ ---------------------------- Certificate Nos. (if available): Name(s) of Record Holder(s): - ------------------------------------------------ ------------------------------------------------ ------------------------------------------------ (Check ONE box if Shares will be tendered by (Please Print) book-entry transfer) / / The Depository Trust Company Address(es): / / Philadelphia Depository Trust Company ------------------------------------------------ Zip Code Account Number: Area Code and Tel. No.: Signature(s): ------------------------------------------------
GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEES) The undersigned, a participant in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program (each, an "Eligible Institution"), hereby guarantees delivery to the Depositary, at one of its addresses set forth above, of certificates evidencing the Shares tendered hereby in proper form for transfer (or certificates evidencing Convertible Debentures that are convertible into the Shares tendered hereby) in proper form for conversion), or confirmation of book-entry transfer of such Shares into the Depositary's accounts at The Depository Trust Company or Philadelphia Depository Trust Company, in each case with delivery of a properly completed and duly executed Letter of Transmittal (or copy thereof) with any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase), and any other required documents, within three trading days after the date of execution of this Notice of Guaranteed Delivery. A "trading day" is any day on which the Nasdaq National Market is open for business. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal (or, in the case of a book-entry transfer, an Agent's Message) and certificates for Shares (or Convertible Debentures) to the Depositary within the time period shown herein. Failure to do so could result in a financial loss to such Eligible Institution. Name of Firm: ------------------------------------------------ Address Authorized Signature - ------------------------------------------------ Name Zip Code Please Type or Print Area Code and Title: Telephone Number: Dated:
NOTE: DO NOT SEND CERTIFICATES FOR SHARES OR CONVERTIBLE DEBENTURES WITH THIS NOTICE. CERTIFICATES FOR SHARES OR CONVERTIBLE DEBENTURES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. EX-99.A4 5 BROKER, DEALER LETTER 1 -------------------------- SALOMON BROTHERS -------------------------- OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF BIG B, INC. AT $15 NET PER SHARE BY RDS ACQUISITION INC., a Wholly Owned Subsidiary of REVCO D.S., INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, OCTOBER 7, 1996, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). September 10, 1996 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by RDS Acquisition Inc., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Revco D.S., Inc., a Delaware corporation, to act as the Dealer Manager in connection with its offer to purchase all outstanding shares of Common Stock, par value $0.001 per share (the "Shares"), of Big B, Inc., an Alabama corporation (the "Company"), at a price of $15 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Purchaser's Offer to Purchase, dated September 10, 1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any supplements or amendments from time to time thereto, collectively constitute the "Offer") enclosed herewith. All capitalized terms used herein but not defined herein shall have the meanings ascribed to them in the Offer to Purchase. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares or 6.5% Convertible Subordinated Debentures Due 2003 of the Company ("Convertible Debentures") registered in your name or in the name of your nominees. Enclosed herewith are copies of the following documents: 1. The Offer to Purchase dated September 10, 1996; 2. The Letter of Transmittal to be used by holders of Shares in accepting the Offer and tendering Shares; 3. The Notice of Guaranteed Delivery to be used to accept the Offer if the certificates evidencing such Shares (or certificates evidencing the Convertible Debentures that are convertible into Shares to be tendered) have not yet been issued, are not immediately available or time will not permit all required documents to reach ChaseMellon Shareholder Services, L.L.C. (the "Depositary") prior to the Expiration Date or the procedure for book-entry transfer cannot be completed on a timely basis; 4. A letter which may be sent to your clients for whose accounts you hold Shares or Convertible Debentures registered in your name or in the name of your nominees, with space provided for obtaining such clients' instructions with regard to the Offer; 5. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9, providing information relating to backup federal income tax withholding; and 2 6. A return envelope addressed to the Depositary. Upon the terms and subject to the conditions of the Offer, the Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn in accordance with the provisions set forth in the section entitled "The Tender Offer--Withdrawal Rights" of the Offer to Purchase. Payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (a) the Share certificates (or in the case of Shares being tendered by the delivery of certificates evidencing the Convertible Debentures as described in the Offer to Purchase, certificates for such Convertible Debentures) or timely confirmation of a book-entry transfer of such Shares, if such procedure is available, into the Depositary's accounts at The Depository Trust Company or Philadelphia Depository Trust Company pursuant to the procedures set forth in the Offer to Purchase, (b) the Letter of Transmittal (or copy thereof), properly completed and duly executed, or an Agent's Message (as defined in the Offer to Purchase) and (c) any other required documents. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, OCTOBER 7, 1996, UNLESS THE OFFER IS EXTENDED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. The Purchaser will not pay for fees or commissions to any broker or dealer or other person (other than to the Dealer Manager and the Information Agent) for soliciting tenders of Shares pursuant to the Offer. You will be reimbursed upon request for customary mailing and handling expenses incurred by you in forwarding the enclosed materials to your customers. The Purchaser will pay any stock transfer taxes incident to the transfer to it of validly tendered Shares, except as otherwise provided in Instruction 6 of the Letter of Transmittal. In order to take advantage of the Offer, a duly executed and properly completed Letter of Transmittal (or copy thereof), with any required signature guarantees and any other required documents, should be sent to the Depositary, and certificates evidencing the tendered Shares (or in the case of holders of Convertible Debentures, certificates for the Convertible Debentures convertible into the tendered Shares) should be delivered or such Shares should be tendered by book-entry transfer, all in accordance with the Offer to Purchase and the Instructions set forth in the Letter of Transmittal. If stockholders wish to tender Shares, but such stockholders are unable to forward their certificates or other required documents prior to the Expiration Date, a tender may be effected by following the guaranteed delivery procedures specified in the section entitled "The Tender Offer--Procedures for Tendering Shares" of the Offer to Purchase. Any inquiries you may have with respect to the Offer should be addressed to Salomon Brothers Inc, the Dealer Manager, or D.F. King & Co., Inc., the Information Agent, at their respective addresses and telephone numbers set forth on the back cover page of the Offer to Purchase. Additional copies of the enclosed materials may be obtained by calling the Information Agent, D.F. King & Co., Inc., 77 Water Street, New York, NY 10005 at (212) 269-5550 (Call Collect). Very truly yours, SALOMON BROTHERS INC NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, THE DEPOSITARY, THE INFORMATION AGENT OR THE DEALER MANAGER OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER NOT CONTAINED IN THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL. EX-99.A5 6 CLIENT LETTER 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF BIG B, INC. AT $15 NET PER SHARE BY RDS ACQUISITION INC., a Wholly Owned Subsidiary of REVCO D.S., INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, OCTOBER 7, 1996, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). September 10, 1996 To Our Clients: Enclosed for your consideration is an Offer to Purchase dated September 10, 1996 (the "Offer to Purchase") and the related Letter of Transmittal (which, together with any supplements or amendments from time to time thereto, collectively constitute the "Offer") relating to the offer by RDS Acquisition Inc., a Delaware corporation (the "Purchaser"), to purchase any and all outstanding shares of Common Stock, par value $0.001 per share (the "Shares"), of Big B, Inc., an Alabama corporation (the "Company"), at a price of $15 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer. The Shares into which the Company's 6.5% Convertible Subordinated Debentures Due 2003 ("Convertible Debentures") are convertible may be tendered without first converting such Convertible Debentures by delivery of the certificates for such Convertible Debentures. Stockholders whose certificates evidencing Shares (or certificates evidencing Convertible Debentures to be delivered to tender Shares into which they are convertible) are not immediately available or who cannot deliver their Share certificates and all other documents required by the Letter of Transmittal to ChaseMellon Shareholder Services, L.L.C. (the "Depositary"), prior to the Expiration Date or who cannot complete the procedures for delivery by book-entry transfer to the Depositary's account at the Book-Entry Transfer Facility (as defined in the Offer to Purchase) on a timely basis and who wish to tender their Shares must do so pursuant to the guaranteed delivery procedures described in the section entitled "The Tender Offer--Procedures for Tendering Shares" of the Offer to Purchase. See Instruction 2 of the Letter of Transmittal. Delivery of documents to a Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility's procedures does not constitute delivery to the Depositary. THIS MATERIAL IS BEING SENT TO YOU AS THE BENEFICIAL OWNER OF THE SHARES HELD BY US FOR YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. WE ARE THE HOLDER OF RECORD OF THE SHARES (OR CONVERTIBLE DEBENTURES) HELD BY US FOR YOUR ACCOUNT. A TENDER OF 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. 2 We request instructions as to whether you wish to have us tender on your behalf any of or all the Shares (or any of or all the whole Shares issuable upon conversion of Convertible Debentures) held by us for your account, upon the terms and conditions set forth in the Offer. Your attention is directed to the following: 1. The offer price is $15 per Share, net to the seller in cash. 2. The Offer and withdrawal rights will expire at 12:00 Midnight, New York City time, on Monday, October 7, 1996, unless the Offer is extended. 3. The Offer is being made for all outstanding Shares. 4. The Purchaser currently owns 1,190,000 Shares, representing approximately 6.4% of the outstanding Shares. 5. The Offer is conditioned upon (i) there being validly tendered and not withdrawn prior to the Expiration Date (as defined in the Offer to Purchase) that number of Shares that, together with the Shares already owned by the Purchaser, would represent a majority of all outstanding Shares on a fully diluted basis on the date of purchase; (ii) the expiration or termination of all waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder; and (iii) the satisfaction of the other conditions set forth in the Offer to Purchase. 6. 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 by the Purchaser pursuant to the Offer. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal and is being made to all holders of Shares. 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 statute. 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. 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 Salomon Brothers Inc, the Dealer Manager, or one or more registered brokers or dealers licensed under the laws of such jurisdiction. If you wish to have us tender any of or all the Shares (including any whole Shares into which Convertible Debentures may be converted) held by us for your account, please so instruct us by completing, executing, detaching and returning to us the instruction form contained in this letter. An envelope to return your instructions to us is enclosed. If you authorize the tender of your Shares (including any Shares into which Convertible Debentures may be converted), all such Shares will be tendered unless otherwise specified on the instruction form contained in this letter. 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. 3 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF BIG B, INC. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase dated September 10, 1996 and the related Letter of Transmittal (which, together with any supplements or amendments thereto, collectively constitute the "Offer"), in connection with the offer by RDS Acquisition Inc., a Delaware corporation (the "Purchaser"), to purchase all the outstanding shares of Common Stock, par value $0.001 per share (the "Shares"), of Big B, Inc., an Alabama 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) 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:* ____________ Shares Account Number: Dated , 1996 SIGN HERE (Signatures) (Please type or print name(s) here) (Please type or print address(es) here) (Area Code and Telephone Number) (Tax Identification or Social Security Number(s)) - --------------- *May include Shares to be received upon conversion of Convertible Debentures held for the account of the undersigned. Unless otherwise indicated, it will be assumed that all of your Shares (including any whole Shares into which Convertible Debentures are convertible) held by us for your account are to be tendered. EX-99.A6 7 TAX GUIDELINES 1 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., 000-000000. The table below will help determine the number to give the payer. - ----------------------------------------------------------- ----------------------------------------------------------- GIVE THE GIVE THE EMPLOYER SOCIAL SECURITY IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF-- FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - ----------------------------------------------------------- ----------------------------------------------------------- 1. An individual's account The individual 2. Two or more individuals The actual owner (joint account) of the account or, if combined funds, any one of the individual's(1) 3. Husband and wife The actual owner (joint account) of the account or, if joint funds, either person(1) 4. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 5. Adult and minor The adult, or (joint account) if the minor is the only contributor, the minor(1) 6. Account in the name of The ward, minor, guardian or committee for or incompetent a designated ward, minor, person(3) or incompetent person 7. a. The usual revocable savings The grantor- trust account (grantor is trustee(1) also trustee) b. So-called trust account that The actual owner(4) is not a legal or valid trust under State law 8. Sole proprietorship account The owner(4) 9. A valid trust, estate, The legal entity (Do or pension trust not furnish the identifying number of the personal rep- resentative or trus- tee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate account The corporation 11. Religious, charitable, or The organization educational organization account 12. Partnership account held in the The partnership name of the business 13. Association, club or other The organization tax-exempt organization 14. A broker or registered nominee The broker or nominee 15. Account with the Department The public entity of Agriculture in the name of a public entity (such as a State or local government, school district or prison) that receives agricultural program payments - ----------------------------------------------------------- -----------------------------------------------------------
(1) List all names 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) Provide the name of the owner. (5) List all names 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. 2 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 Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. 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), of the Internal Revenue Code of 1986, as amended (the "Code"), or an individual retirement plan. - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any 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) of the Code. - An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1) of the Code. - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. PAYMENTS NOT GENERALLY SUBJECT TO BACKUP WITHHOLDING 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 of the Code. - 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 of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: A Payee 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 such Payee has not provided its correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under section 852 of the Code). - Payments described in section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under section 1451 of the Code. - Payments made by certain foreign organizations. - Payments made to a nominee. EXEMPT PAYEES DESCRIBED ABOVE MUST STILL COMPLETE THE SUBSTITUTE FORM W-9 TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE SUBSTITUTE FORM W-9 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 of the Code. PRIVACY ACT NOTICE.--Section 6109 of the Code requires most recipients of dividends, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividends, 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 that 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. (4) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. If you fail to include any portion of an includible payment for interest, dividends or patronage dividends in gross income and such failure is due to negligence, a penalty of 20% is imposed on any portion of an underpayment attributable to that failure. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.A7 8 SUMMARY ADVERTISEMENT 1 - -------------------------------------------------------------------------------- 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 September 10, 1996 and the related Letter of Transmittal, and is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. In any jurisdictions where securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of the Purchaser by Salomon Brothers Inc (the "Dealer Manager") or one or more registered brokers or dealers licensed under the laws of such jurisdiction. NOTICE OF OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF BIG B, INC. AT $15 NET PER SHARE BY RDS ACQUISITION INC., A WHOLLY OWNED SUBSIDIARY OF REVCO D.S., INC. RDS Acquisition Inc., a Delaware corporation (the "Purchaser"), which is a wholly owned subsidiary of Revco D.S., Inc., a Delaware corporation ("Revco"), is offering to purchase all outstanding shares of Common Stock, par value $.001 per share (the "Shares"), of Big B, Inc., an Alabama corporation (the "Company"), at a price of $15 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 September 10, 1996 (the "Offer to Purchase") and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). The purpose of the Offer is to enable Revco to acquire control of, and the entire equity interest in, the Company. The Offer, as the first step in the acquisition of the Company, is intended to facilitate the acquisition of all the Shares. -------------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, OCTOBER 7, 1996, UNLESS THE OFFER IS EXTENDED. -------------------------------------------------------------------------- The Offer is conditioned upon there being validly tendered and not withdrawn prior to the Expiration Date (as defined in the Offer to Purchase) that number of Shares that, together with the 1,190,000 shares already owned by the Purchaser, would represent a majority of all outstanding Shares on a fully diluted basis on the date of purchase. The Offer is also subject to certain other conditions set forth in the Offer to Purchase. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered to the Purchaser and not properly withdrawn as, if and when the Purchaser gives oral or written notice to ChaseMellon Shareholder Services, L.L.C. (the "Depositary") of the Purchaser's acceptance for payment of such Shares. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment 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 payment from the Purchaser and transmitting payment to tendering stockholders. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates with respect to (or a timely Book-Entry Confirmation (as defined in the Offer to Purchase) with respect to) such Shares, (ii) a Letter of Transmittal (or a copy thereof), properly completed and duly signed, with any required signature guarantees, and, in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase), and (iii) any other required documents. Accordingly, tendering stockholders may be paid at different times depending upon when such documents are actually received by the Depositary. Under no circumstances will interest be paid on the purchase price of the Shares to be paid by the Purchaser, regardless of any extension of the Offer or any delay in making payment for tendered Shares. Except as otherwise provided below, tenders of Shares 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 and paid for by the Purchaser pursuant to the Offer, may be withdrawn at any time after November 8, 1996. For a withdrawal to be effective, a written or fax notice of withdrawal must be timely received by the Depositary at one of its addresses as set forth below and must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the certificate relating to the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates with respect to Shares have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution (as defined in 2 Section 2 of the Offer to Purchase), the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered pursuant to the procedures for book-entry transfer as set forth in Section 2 of the Offer to Purchase, any notice of withdrawal must also specify the name and number of the account at the appropriate Book-Entry Transfer Facility (as defined in the Offer to Purchase) to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for any purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 2 of the Offer to Purchase at any time prior to the Expiration Date. 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 the Purchaser, Revco, the Depositary, the Information Agent, the Dealer Manager or any other person will be under any duty to give information of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such information. The Purchaser expressly reserves the right, in its sole discretion, at any time or from time to time, to extend the period of time during which the Offer is open by giving oral or written notice of such extension to the Depositary. The information required to be disclosed by paragraph (e)(1)(vii) of Rule 14d-6 under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. Requests are being made to the Company for use of the Company's stockholder lists and security position listings for the purpose of disseminating the Offer to holders of Shares and communicating with holders of Shares in connection with the Offer. The Offer to Purchase, the related Letter of Transmittal and other relevant materials will be mailed to record holders of Shares, and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder lists, or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. Questions and requests for assistance may be directed to the Dealer Manager or the Information Agent at their respective addresses and telephone numbers as set forth below. The Purchaser will not pay any fees or commissions to any broker or dealer or to any other person (other than the Dealer Manager and the Information Agent) for soliciting tenders of shares pursuant to the Offer. Additional copies of the Offer to Purchase, the Letter of Transmittal and all other tender offer materials may be obtained from the Information Agent or the Dealer Manager or from brokers, dealers, commercial banks and trust companies, and will be furnished promptly at the Purchaser's expense. The Information Agent for the Offer is: D. F. KING & CO., INC. 77 Water Street New York, NY 10005 Bankers and Brokers Call Collect: (212) 269-5550 Toll Free (800) 488-8075 The Depositary for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. By Mail: By Hand or Overnight Delivery: ChaseMellon Shareholder Services, L.L.C. ChaseMellon Shareholder Services, L.L.C. Reorganization Department Reorganization Department P. O. Box 798 120 Broadway Midtown Station 13th Floor New York, NY 10018 New York, NY 10271
By Fax Transmission: (201) 329-8936 For Fax Confirmation Only by Telephone: (201) 296-4209 The Dealer Manager for the Offer is: SALOMON BROTHERS INC Seven World Trade Center New York, New York 10048 Call Collect: (212) 783-5141 September 10, 1996 - -------------------------------------------------------------------------------- EX-99.A8 9 PRESS RELEASE 1 Exhibit (a)(8) FOR IMMEDIATE RELEASE MEDIA CONTACT: INVESTOR CONTACT: Thomas Dingledy Dianne McCormick 216/425-9811 x6145 216/425-9811 x1900 Joele Frank / Dan Katcher Abernathy MacGregor Group 212/371-5999 REVCO ANNOUNCES OFFER TO ACQUIRE BIG B FOR $15 PER BIG B SHARE TWINSBURG, OHIO (SEPTEMBER 9, 1996) -- Revco D.S., Inc. [NYSE: RXR] today announced that it is commencing a cash tender offer for all of the outstanding shares of Big B, Inc. [NASDAQ: BIGB] at a price of $15 per share. This represents a premium of 53% over the $9.81 average closing price of Big B stock for the 90-calendar day period ended Friday, September 6, 1996. Following the completion of the tender offer, Revco intends to consummate a merger in which all remaining Big B shareholders will also receive the same cash price paid in the tender offer. Big B has approximately 22.0 million shares on a fully diluted basis, giving the transaction a total equity value of approximately $330 million. Revco currently owns 1,190,000 shares of Big B common stock, representing approximately 5.4% of Big B's shares on a fully diluted basis. The transaction is anticipated to be accretive to Revco's earnings per share in the first year of the combination. D. Dwayne Hoven, President and Chief Executive Officer of Revco, said "This is truly a win-win opportunity for Revco and Big B shareholders, employees and customers. With Revco's financial resources, technological expertise and marketing and sales capability, we can together grow our combined company's customer base and increase our sales potential. Among other efficiencies, this combination will allow the combined company to spread costs over a larger base of stores. This will assist us in meeting the increasing customer demand for lower pharmacy prices. We hope that the Board of Directors of Big B will recognize the significant benefits to Big B and its shareholders." The tender offer is not contingent on Revco obtaining financing. Revco intends to finance the tender offer through a combination of cash on hand and bank borrowings. The tender offer is conditioned upon the acquisition of a majority of Big B's shares 2 2 on a fully diluted basis and the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The complete terms and conditions of the tender offer will be set forth in the offering documents to be filed with the Securities and Exchange Commission. The tender offer is scheduled to expire at midnight (EDT) on Monday, October 7, 1996. Salomon Brothers Inc is acting as Dealer Manager for the offer and D.F. King & Co., Inc. is acting as Information Agent. Following is the complete text of a letter sent today from D. Dwayne Hoven, President and Chief Executive Officer of Revco D.S., Inc. to Anthony J. Bruno, Chairman of the Board and Chief Executive Officer of Big B, Inc.: September 9, 1996 Mr. Anthony J. Bruno Chairman of the Board and Chief Executive Officer Big B, Inc. 2600 Morgan Road, S.E. Bessemer, AL 35023 Dear Anthony: As you know from our prior conversations, Revco D.S., Inc. is interested in pursuing a business combination with Big B, Inc. Unfortunately, because Big B has to date been unwilling to proceed with such a transaction, we are announcing this morning our offer to buy all of Big B's outstanding shares for a price of $15 per share in cash, or an aggregate equity value of approximately $330 million on a fully diluted basis. As we have previously said, we would be happy to work with you to structure a tax-free transaction to give your shareholders an ongoing equity interest in the combined company. 3 3 We believe that Revco's offer is a highly attractive opportunity for Big B shareholders representing a premium of 53% over the $9.81 average closing price of Big B stock for the 90-calendar day period ended Friday, September 6, 1996. We believe that this is the fastest, most efficient way to bring our companies together. We hope that the Board of Directors of Big B will recognize the significant benefits to Big B and its shareholders. The combination of Revco and Big B offers numerous advantages over either company remaining as a stand-alone entity, and, for Big B, over any other possible strategic combination. Revco and Big B represent an excellent geographic fit, with only limited overlap of stores and distribution centers. Among other efficiencies, this combination will allow the combined company to spread costs over a larger base of stores. This will assist us in meeting the increasing customer demand for lower pharmacy prices. Revco is a Fortune 500 company and is among the top performers in the drugstore industry. Since 1993, we have more than doubled our sales and operating profit, and net income per share has more than tripled over the same time period. Revco has one of the most technologically advanced pharmacy systems and offers some of the most innovative marketing programs in the drugstore industry, designed to add consumer value and to enhance the pharmacist-patient relationship. We have the highest respect for you and all Big B employees. We anticipate retaining the services of Big B's field and distribution center employees and will entertain suggestions from you and your senior management team regarding corporate employees. Like Big B, Revco has always prided itself in its role as a strong community partner and good corporate citizen. Revco and its employees donate time and money to a variety of charitable organizations in the areas we serve. Revco recognizes its corporate responsibility to give back to every community we call home. As a native of Alabama, I am particularly sensitive to those issues in this transaction. 4 4 Revco's objective is a transaction that is enthusiastically supported by Big B's shareholders and employees, as well as Big B's many loyal customers. Revco and its advisors are prepared to meet with Big B's Board, management and advisors to answer any questions they may have about our offer. We are convinced that this combination serves the best interests of both companies. Sincerely, /s/ D. Dwayne Hoven D. Dwayne Hoven President and Chief Executive Officer, Revco D.S., Inc. Revco, recognized as a Fortune 500 company, is the second largest drugstore chain in the U.S. operating 2,184 stores in 14 contiguous Midwestern, Southeastern and Eastern states. The stores sell prescription and over-the-counter drugs, health and beauty aids and other consumer products. Revco employs more than 32,000 associates in its stores, network of five distribution centers, regional offices and corporate offices in Twinsburg, Ohio. Note to Editors: Today's news release, along with other news about Revco, is available by calling Company News On-Call at 1-800-758-5804, extension 751257. Information is also available on the Internet at: http:\\www.revco.com. # # # SATELLITE UPLINK FOR REVCO B-ROLL: Monday, September 9 10:00 am - 10:15 pm EDT C-band uplink & space segment for Galaxy 9 Transponder 22 Monday, September 9 2:00 pm - 2:15 pm EDT C-band uplink & space segment for Galaxy 9 Transponder 22 5 5 Audio 6.2 & 6.8 If you have any technical questions or problems with the satellite feed for Revco B-roll, please call Erin Lahey at 212/682-8300. EX-99.C 10 AMENDED AND RESTATED CREDIT AGREEMENT 1 Exhibit (C) ------------------------------------------------------------ AMENDED AND RESTATED CREDIT AGREEMENT, dated as of July 27, 1995, among REVCO D.S., INC., as Borrower, VARIOUS FINANCIAL INSTITUTIONS, as Revolving Lenders, BANQUE PARIBAS and BANK OF AMERICA ILLINOIS, as Managing Agents and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION as Administrative Agent ------------------------------------------------------------ 2 TABLE OF CONTENTS
Page ---- ARTICLE I Definitions and Interpretation ------------------------------ SECTION 1.01. Defined Terms............................... 2 SECTION 1.02. Use of Defined Terms........................ 2 SECTION 1.03. Interpretation.............................. 3 SECTION 1.04. Accounting Matters.......................... 4 SECTION 1.05. Conflict in Credit Documents................ 4 SECTION 1.06. Legal Representation of Parties................................. 4 SECTION 1.07. Assignments from the Existing Credit Agreement........................ 4 SECTION 1.08. Assignment of Agency........................ 7 ARTICLE II Commitments ----------- SECTION 2.01. Commitments................................. 7 SECTION 2.02. Revolving Credit Commitments............................. 7 SECTION 2.03. Revolving Lenders Not Required To Extend Credit........................... 8 SECTION 2.04. Reduction of Total Revolving Credit Commitment Amount................ 9 SECTION 2.05. Optional Reductions......................... 9 SECTION 2.06. Mandatory Revolving Credit Commitment Reductions................... 9 SECTION 2.07. Fees........................................ 9 SECTION 2.08. Revolving Nonuse Fee........................ 9 SECTION 2.09. Letter of Credit Fees....................... 10 SECTION 2.10. Administrative Agent Fee.................... 11 SECTION 2.11. Amendment Fee............................... 11 SECTION 2.12. Increased Costs............................. 11 SECTION 2.13. Swing Line.................................. 12 SECTION 2.14. Bid Borrowings.............................. 15 SECTION 2.15. Procedure for Bid Borrowings................ 15 ARTICLE III Loans and Notes --------------- SECTION 3.01. Loan Procedure.............................. 20 SECTION 3.02. Revolving Loan Requests..................... 20 SECTION 3.03. Funding of Borrowings....................... 21 SECTION 3.04. Notes....................................... 22 SECTION 3.05. Principal Payments.......................... 20 SECTION 3.06. Repayments and Prepayments.................. 20
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Page ---- SECTION 3.07. Loan Application............................ 25 SECTION 3.08. Interest Payments........................... 25 SECTION 3.09. Rates....................................... 25 SECTION 3.10. Default Rate................................ 26 SECTION 3.11. Payment Dates............................... 26 SECTION 3.12. Rate Determinations......................... 27 SECTION 3.13. Taxes, etc.................................. 28 SECTION 3.14. Payments, Computations, etc................. 29 SECTION 3.15. Allocation.................................. 29 SECTION 3.16. Time, Place and Manner of Payment.............................. 30 SECTION 3.17. Computation................................. 30 SECTION 3.18. Business Day Adjustment..................... 30 SECTION 3.19. Proration of Payments....................... 31 SECTION 3.20. Setoff...................................... 32 SECTION 3.21. Use of Proceeds............................. 32 SECTION 3.22. Payments by Revco........................... 32 SECTION 3.23. Payments by the Revolving Lenders to the Administrative Agent................................... 33 ARTICLE IV Interest Rate Options --------------------- SECTION 4.01. Borrowing Elections......................... 34 SECTION 4.02. Continuation and Conversion Elections............................... 34 SECTION 4.03. Funding..................................... 36 SECTION 4.04. Eurodollar Rate Lending Unlawful................................ 36 SECTION 4.05. Eurodollar Deposits Unavailable............................. 37 SECTION 4.06. Increased Eurodollar Rate Loan Costs, etc.............................. 37 SECTION 4.07. Funding Losses.............................. 38 ARTICLE V Letters of Credit ----------------- SECTION 5.01. LC Issuance Request......................... 39 SECTION 5.02. Issuance of Letters of Credit............... 39 SECTION 5.03. Other Revolving Lender's Participations.......................... 40 SECTION 5.04. Disbursements............................... 41 SECTION 5.05. Reimbursements.............................. 41 SECTION 5.06. Deemed Disbursement......................... 42
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Contents, p.3 Page ---- SECTION 5.07. Nature of Reimbursement Obligations ......................................... 42 ARTICLE VI Agreement Effectiveness and --------------------------- Conditions to Credit Extension ------------------------------ SECTION 6.01. Amendment Effective Data................................. 44 SECTION 6.02. Resolutions, etc......................................... 44 SECTION 6.03. Notes, Guaranties........................................ 45 SECTION 6.04. No Contest, etc.......................................... 45 SECTION 6.05. No Materially Adverse Effect............................. 45 SECTION 6.06. Certificate as to Warranties, No Default, etc......................................... 45 SECTION 6.07. Opinions of Counsel...................................... 45 SECTION 6.08. Closing Fees, Expenses, etc.............................. 46 SECTION 6.09. HSI Credit Agreement Terminated........................................... 46 SECTION 6.10. All Credit Extensions.................................... 46 SECTION 6.11. Compliance with Warranties, No Default, etc......................................... 47 SECTION 6.12. Credit Request, etc...................................... 47 SECTION 6.13. Satisfactory Legal Form.................................. 47 ARTICLE VII Representations and Warranties ------------------------------ SECTION 7.01. Organization, Power, Authority, etc....................................... 48 SECTION 7.02. Due Authorization, Noncontravention, etc.................................... 49 SECTION 7.03. Government Approval, Regulation, etc...................................................... 49 SECTION 7.04. Validity, etc............................................ 50 SECTION 7.05. Financial Information.................................... 50 SECTION 7.06. No Materially Adverse Effect............................. 51 SECTION 7.07. Litigation, etc.......................................... 51 SECTION 7.08. Regulations G, T, U and X................................ 51 SECTION 7.09. Pension and Welfare Plans................................ 51 SECTION 7.11. Subsidiaries............................................. 51 SECTION 7.12. Taxes.................................................... 52 SECTION 7.13. Absence of Default....................................... 52 SECTION 7.14. Labor Controversies...................................... 53 SECTION 7.15. Capitalization........................................... 53 SECTION 7.16. Ownership of Properties.................................. 53 SECTION 7.17. Environmental Warranties................................. 53
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Page ---- SECTION 7.18. Accuracy of Information............................... 55 SECTION 7.19. Refinancing of Certain Indebtedness...................................... 55 SECTION 7.20. Representations and Warranties True and Correct.................................. 55 ARTICLE VIII Covenants --------- SECTION 8.01. Affirmative Covenants................................. 56 SECTION 8.02. Financial Information, etc............................ 56 SECTION 8.03. Maintenance of Existences, etc............................................... 58 SECTION 8.04. Foreign Qualification................................. 59 SECTION 8.05. Payment of Taxes, etc................................. 59 SECTION 8.06. Insurance............................................. 59 SECTION 8.07. Notice of Default, Litigation, etc............................................... 60 SECTION 8.08. Performance of Obligations............................ 61 SECTION 8.09. Books and Records..................................... 61 SECTION 8.10. Compliance with Laws, etc............................. 62 SECTION 8.11. Environmental Matters................................. 62 SECTION 8.12. Maintenance of Property............................... 62 SECTION 8.13. Negative Covenants.................................... 62 SECTION 8.14. Business Activities................................... 63 SECTION 8.15. Indebtedness.......................................... 63 SECTION 8.16. Liens................................................. 64 SECTION 8.17. Financial Condition................................... 66 SECTION 8.18. Investments........................................... 67 SECTION 8.19. Restricted Payments, etc.............................. 67 SECTION 8.20. Take or Pay Contracts................................. 68 SECTION 8.21. Consolidation, Merger, Acquisitions, etc................................. 68 SECTION 8.22. Asset Dispositions, etc............................... 69 SECTION 8.23. Modification of Certain Instruments, Organic Documents, etc............................................... 69 SECTION 8.24. Transactions with Affiliates.......................... 70 SECTION 8.25. Inconsistent Agreements............................... 70 SECTION 8.26. Environmental Matters................................. 71 SECTION 8.27. Limitation on Negative Pledges, etc............................................... 71
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Page ---- ARTICLE IX Events of Default ----------------- SECTION 9.01. Events of Default..................................... 71 SECTION 9.02. Nonpayment of Obligations............................. 71 SECTION 9.03. Nonperformance of Certain Covenants......................................... 72 SECTION 9.04. Nonperformance of Other Obligations....................................... 72 SECTION 9.05. Bankruptcy, Insolvency, etc........................... 73 SECTION 9.06. Breach of Warranty.................................... 73 SECTION 9.07. Default on Other Indebtedness...................................... 73 SECTION 9.08. Invalidity of HSI Guaranty............................ 74 SECTION 9.09. Pension Plans......................................... 74 SECTION 9.10. Judgments............................................. 74 SECTION 9.11. Change in Control..................................... 75 SECTION 9.12. Action if Bankruptcy.................................. 75 SECTION 9.13. Action if Other Event of Default........................................ 75 ARTICLE X The Agents ---------- SECTION 10.01. Appointment and Authorization; "Agent"........................................... 75 SECTION 10.02. Delegation of Duties.................................. 76 SECTION 10.03. Liability of Agents................................... 77 SECTION 10.04. Reliance by Agents.................................... 78 SECTION 10.05. Notice of Default..................................... 78 SECTION 10.06. Credit Decision....................................... 78 SECTION 10.07. Indemnification of Agent.............................. 79 SECTION 10.08. Agent in Individual Capacity.......................... 79 SECTION 10.09. Successor Agent....................................... 80 SECTION 10.10. Managing Agents....................................... 80 ARTICLE XI Miscellaneous ------------- SECTION 11.01. Waivers, Amendments, etc.............................. 81 SECTION 11.02. Notices............................................... 82 SECTION 11.03. Fees and Expenses..................................... 83 SECTION 11.04. Indemnification....................................... 85 SECTION 11.05. Survival.............................................. 87 SECTION 11.06. Severability.......................................... 87
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Page ---- SECTION 11.07. Headings............................................. 87 SECTION 11.08. Counterparts......................................... 88 SECTION 11.09. GOVERNING LAW; ENTIRE AGREEMENT........................................ 88 SECTION 11.10. Successors and Assigns............................... 88 SECTION 11.11. Assignments and Participations................................... 88 SECTION 11.12. Revco Assistance..................................... 91 SECTION 11.13. Other Transactions................................... 92 SECTION 11.14. WAIVER OF JURY TRIAL, ETC............................ 92 SECTION 11.15. SUBMISSION TO JURISDICTION........................... 92 SECTION 11.16. Marshalling; Recapture............................... 93 SECTION 11.17. Confidentiality...................................... 93
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Contents, p.7 INDEX OF SCHEDULES AND EXHIBITS SCHEDULE I Definitions SCHEDULE II Disclosure Schedule SCHEDULE III Assignments of Existing Credit Agreement SCHEDULE IV Existing Letters of Credit SCHEDULE V Pricing Matrix SCHEDULE VI Revolving Credit Commitments and Revolving Percentages EXHIBIT A-1 Form of Revolving Note EXHIBIT A-2 Form of Swing Note EXHIBIT A-3 Form of Bid Note EXHIBIT B-1 Form of Competitive Bid Request EXHIBIT B-2 Form of Invitation for Competitive Bids EXHIBIT B-3 Form of Form of Competitive Bid EXHIBIT C-1 Form of Revolving Loan Request EXHIBIT C-2 Form of Swing Loan Request EXHIBIT C-3 Form of LC Issuance Request EXHIBIT D Form of Continuation/Conversion Notice EXHIBIT E Form of Compliance Certificate EXHIBIT F-1 Form of Opinion of Jack A. Staph, Esq. EXHIBIT F-2 Form of Opinion of Mayer, Brown & Platt EXHIBIT G Form of Assignment and Acceptance Agreement EXHIBIT H Form of HSI Guaranty
9 AMENDED AND RESTATED CREDIT AGREEMENT THIS AMENDED AND RESTATED CREDIT AGREEMENT dated as of July 27, 1995, among REVCO D.S., INC., a Delaware corporation ("Revco"), various financial institutions which are, or may become, parties hereto (the "Revolving Lenders"), BANQUE PARIBAS, a French banking corporation ("Paribas"), BANK OF AMERICA ILLINOIS, an Illinois banking corporation, formerly known as Continental Bank, ("BAI", and, with Paribas, the "Managing Agents") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BofA"), as administrative agent (in such capacity, the "Administrative Agent") and as bid loan agent (in such capacity, the "Bid Loan Agent") for the Revolving Lenders. W I T N E S S E T H: WHEREAS Revco, certain financial institutions (the "Original Revco Lenders"), BAI as Administrative Agent and the Managing Agents entered into that certain Credit Agreement dated as of July 15, 1994, as amended or modified and in effect immediately prior to the Amendment Effective Date (the "Existing Credit Agreement") whereunder the Original Revco Lenders agreed to make term loans in a maximum aggregate outstanding principal amount not to exceed $203,000,000, to make revolving loans and to issue letters of credit in the maximum amount of $400,000,000 and to make swing loans in the maximum aggregate outstanding principal amount not to exceed $30,000,000 (such term loans, revolving loans, letters of credit and swing loans outstanding on the Amendment Effective Date, collectively the "Existing Revco Credit Extensions"); WHEREAS Hook-SupeRx, Inc., a Delaware corporation and wholly owned subsidiary of Revco ("HSI"), certain financial institutions (the "HSI Lenders"), BAI as Administrative Agent and the Managing Agents entered into that certain Fourth Amended and Restated Credit Agreement dated as of July 15, 1994, as amended or modified and in effect immediately prior to the Amendment Effective Date (the "HSI Credit Agreement") whereunder the HSI Lenders agreed to make term loans in the original maximum 10 2 outstanding principal amount of $202,000,000 (such term loans outstanding on the Amendment Effective Date, collectively the "HSI Credit Extensions"); WHEREAS Revco desires to obtain commitments from the Revolving Lenders for reducing revolving Credit Extensions to Revco in an aggregate principal amount outstanding at any time not to exceed $650,000,000 pursuant to which the Revolving Lenders will refinance the Existing Revco Credit Extensions and the HSI Credit Extensions; WHEREAS Revco has requested the Revolving Lenders to amend and restate the Existing Credit Agreement on the terms and conditions set forth in this Agreement, to among other things, set forth the terms and conditions under which the Revolving Lenders hereafter will make Credit Extensions to Revco; it being the intention of Revco, the Revolving Lenders and the Administrative Agent that this Agreement and the Credit Documents executed in connection herewith shall not effect the novation of the obligations of Revco under the Existing Credit Agreement but be merely a restatement and, where applicable, an amendment of the terms governing such obligations hereafter; and WHEREAS, immediately prior to the Amendment Effective Date certain letters of credit issued pursuant to the Existing Credit Agreement will be outstanding, which letters of credit shall be deemed to be Letters of Credit issued and outstanding under this Agreement for all purposes hereof and of the other Credit Documents after giving effect to the Amendment Effective Date. NOW, THEREFORE, the parties hereto, intending legally to be bound hereby, agree as follows: ARTICLE I Definitions and Interpretation ------------------------------ SECTION 1.01. DEFINED TERMS. Capitalized terms (whether or not underscored) used in this Agreement, including its preamble and recitals, and the other Credit Documents shall (unless a clear contrary intention appears) have the respective meanings assigned thereto in Schedule I. 11 3 SECTION 1.02. USE OF DEFINED TERMS. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall have such meanings when used in the Disclosure Schedule and each Credit Request, Continuation/Conversion Notice, Compliance Certificate, Assignment and the other Credit Documents and each notice and other communication delivered from time to time in connection with this Agreement or any other Credit Document. SECTION 1.03. INTERPRETATION. In this Agreement and each other Credit Document, unless a clear contrary intention appears: (a) the singular number includes the plural number and vice versa; (b) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually; (c) reference to any gender includes each other gender; (d) reference to any agreement (including this Agreement and the Schedules and Exhibits hereto), document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof and reference to any promissory note includes any promissory note which is an extension or renewal thereof or a substitute or replacement therefor; (e) reference to any Applicable Law means such Applicable Law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder; (f) reference to any Article, Section, Schedule or Exhibit means such Article or Section of this Agreement or such other Credit Document or such Schedule or Exhibit to this Agreement or such other Credit 12 4 Document, as the case may be, and references in any Article, Section or definition to any clause means such clause of such Article, Section or definition; (g) "hereunder", "hereof", "hereto", and words of similar import shall be deemed references to this Agreement or such other Credit Document, as the case may be, as a whole and not to any particular Article, Section or other provision hereof or thereof; (h) "including" (and with correlative meaning "include") means including without limiting the generality of any description preceding such term; and (i) relative to the determination of any period of time, "from" means "from and including", "to", means "to but excluding" and "through" means "through and including". SECTION 1.04. ACCOUNTING MATTERS. For purposes of this Agreement and each other Credit Document, all accounting terms used herein or therein shall be interpreted, all accounting determinations and computations hereunder or thereunder (including under Section 8.2.4) shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared, in accordance with those generally accepted accounting principles ("GAAP") applied in the preparation of the financial statements of Revco referred to in Section 7.5(a). SECTION 1.05. CONFLICT IN CREDIT DOCUMENTS. If there is any conflict between this Agreement and any other Credit Document, this Agreement and such other Credit Document shall be interpreted and construed, if possible, so as to avoid or minimize such conflict but, to the extent (and only to the extent) of such conflict, this Agreement shall prevail and control. SECTION 1.06. LEGAL REPRESENTATION OF PARTIES. This Agreement and the other Credit Documents were negotiated by the parties with the benefit of legal representation and any rule of construction or interpretation otherwise requiring this Agreement or any other Credit Document to be construed or interpreted against any party shall not apply to any construction or interpretation hereof or thereof. 13 5 SECTION 1.07. ASSIGNMENTS FROM THE EXISTING CREDIT AGREEMENT. By their execution of Schedule III each of the Original Revco Lenders listed on Schedule III that are not Revolving Lenders hereunder agree, and by their execution of this Agreement each of the Revolving Lenders agree, that: (a) effective as of the Amendment Effective Date, (i) each of the Original Revco Lenders listed on Schedule III (each, an "Assignor Lender") will sell and assign an interest in and to all of such Assignor Lender's respective rights and obligations under the Revolving Credit Commitment, if any, listed with respect to such Assignor Lender on Schedule III together with all Revolving Loans, Reimbursement Obligations and obligations to participate and participations in Letters of Credit and Swing Loans, if any, and all Term Loans (as such term is defined in the Existing Credit Agreement) of such Assignor Lender existing as of the Amendment Effective Date (such Revolving Credit Commitment, Revolving Loans, Reimbursement Obligations, Obligations to participate and participations in Letters of Credit and Swing Loans, and Term Loans of any Assignor Lender being the "Assigned Interests"), and (ii) each Revolving Lender party to this Agreement after giving effect to and on the Amendment Effective Date (each, an "Assignee Lender") will purchase and assume the Assigned Interest set forth opposite its name on Schedule III (each such assignment being made to each Assignee Lender in an amount equal to each Assignor Lender's pro rata share of each of the respective Assigned interests purchased and assumed by such Assignee Lender); (b) as of the Amendment Effective Date, prior to giving effect to any assignment under this Section 1.07 as of such date, each Assignor Lender represents and warrants, as to the assignment effected by such Assignor Lender, that as of the Amendment Effective Date: (i) its Revolving Credit Commitment, if any, is in the dollar amount specified as its Revolving Credit Commitment on Schedule III hereto, and the outstanding principal amount of its Term Loans is as specified on Schedule III hereto and no Revolving Loans (other than Revolving Loans to be paid on the Amendment Effective Date) or Term Loans (other than Term Loans to be paid on the Amendment Effective Date) or Reimbursement 14 6 Obligations are owing to such Assignor Lender; (ii) such Assignor Lender is the legal and beneficial owner of the Assigned Interests being assigned by it hereunder and such Assigned Interests are free and clear of any adverse claim or encumbrance created by such Assignor Lender; (c) each Assignor Lender and Assignee Lender confirms and agrees with each other and each other Revolving Lender as to the assignment effected by such Assignor Lender and Assignee Lender, as the case may be, as follows: (i) each such Assignor Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Existing Credit Agreement or this Agreement or with respect to the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Existing Credit Agreement, any "Credit Document" (as defined in the Existing Credit Agreement), this Agreement or any Credit Document; (ii) each such Assignor Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of Revco or any of its Subsidiaries or the performance or observance by Revco or any of its Subsidiaries of any of their respective obligations under the Existing Credit Agreement, any "Credit Document" (as defined in the Existing Credit Agreement) this Agreement or any Credit Document; (iii) each Assignee Lender confirms that it has received such documents and information as it has deemed appropriate to make its own credit analysis and decision to execute and deliver this Agreement and agrees that, except as provided in clause (b) above, it shall have no recourse against any Agent, the Collateral Agent, any Assignor Lender or any other Revolving Lender with respect to any matters relating to the Credit Agreement or this Agreement; and (iv) each such Assignee Lender will, independently and without reliance upon any Agent, the Collateral Agent, any Assignor Lender or any other Revolving Lender based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Credit Documents; 15 7 (d) as of the Amendment Effective Date, (i) each Assignee Lender shall be a party to this Agreement and, to the extent provided in this Agreement, have the rights and obligations of a Revolving Lender hereunder and (ii) each Assignor Lender shall, to the extent provided herein, relinquish its rights and be released from its obligations under this Agreement as to any assignment effective pursuant to this Section 1.07; (e) from and after the Amendment Effective Date, the Administrative Agent shall make all payments under this Agreement in respect of the Assigned Interest assigned hereby (including, all payments of principal, interest and fees with respect thereto) to the Assignee Lenders as Revolving Lenders hereunder. SECTION 1.08. ASSIGNMENT OF AGENCY. (a) On the Amendment Effective Date, BAI hereby assigns all of its rights, responsibilities and obligations as Administrative Agent under the Existing Credit Agreement, and any documents executed in connection therewith, to BofA, as successor Administrative Agent. On the Amendment Effective Date, BofA hereby assumes all of the rights, responsibilities and obligations of the Administrative Agent under and pursuant to the terms of this Agreement and any similar provision in any Credit Document executed in connection herewith. (b) On the Amendment Effective Date, BAI hereby assigns all of its rights, responsibilities and obligations as Bid Loan Trustee under the Existing Credit Agreement and any documents executed in connection therewith, to BofA, as Administrative Agent. On the Amendment Effective Date, BofA hereby assumes all the rights, responsibilities and obligations of the Bid Loan Trustee under and pursuant to the terms of this Agreement and any similar provision in any Credit Document executed in connection herewith. ARTICLE II Commitments ----------- SECTION 2.01. COMMITMENTS. Subject to the terms and conditions of this Agreement (including Article VI), each Revolving Lender severally and for itself alone agrees to provide the commitments described in this Section 2.01. 16 8 SECTION 2.02. REVOLVING CREDIT COMMITMENTS. Each Revolving Lender will, from time to time on any Business Day on or after the Amendment Effective Date and before the Revolving Credit Commitment Termination Date: (a) make Loans (relative to such Revolving Lender, its "Revolving Loans") to Revco equal to its Revolving Percentage of the aggregate principal amount of any Borrowing of Revolving Loans requested from all Revolving Lenders on such Business Day; and (b) issue for the account of Revco (in the case of the applicable LC Issuer), or participate in (in the case of all other Revolving Lenders), Letters of Credit, in accordance with Article V. The commitment of each Revolving Lender described in this Section 2.02. is set forth on Schedule VI and is herein referred to as its "Revolving Credit Commitment". SECTION 2.03. REVOLVING LENDERS NOT REQUIRED TO EXTEND CREDIT. No Revolving Lender shall be required to: (a) make any Revolving Loan or issue or participate in any Letter of Credit under the Revolving Credit Commitments if, after giving effect thereto, the then aggregate outstanding principal amount of all Revolving Loans, Bid Loans and Swing Loans plus the then aggregate amount of all Letter of Credit Outstandings relative to (i) all Revolving Lenders would exceed $650,000,000 (as such amount may be reduced from time to time pursuant to Section 2.04, the "Total Revolving Credit Commitment Amount"), or (ii) such Revolving Lender would exceed its Revolving Percentage (after giving effect to all Revolving Loans, Bid Loans and Swing Loans and Letter of Credit Outstandings (whether or not funded by any particular Revolving Lender) as if each Revolving Lender had funded its respective Revolving Loans, Bid Loans and Swing Loans and Letter of Credit Outstandings in accordance with the terms of this Agreement) of the aggregate principal amount of all Revolving Loans 17 9 outstanding from and Letter of Credit Outstandings of all Revolving Lenders; or (b) issue or participate in any Letter of Credit if, after giving effect thereto, the aggregate Letter of Credit Outstandings would exceed $100,000,000. Subject to the terms hereof, Revco may from time to time borrow, prepay and reborrow Revolving Loans; and Revco may request the issuance of Letters of Credit, allow Letters of Credit to expire undrawn or, if drawn upon, repay Reimbursement Obligations relative thereto and request the issuance of new Letters of Credit, in all cases pursuant to the Revolving Credit Commitments. SECTION 2.04. REDUCTION OF TOTAL REVOLVING CREDIT COMMITMENT AMOUNT. The Total Revolving Credit Commitment Amount is subject to reduction from time to time pursuant to this Section 2.04. SECTION 2.05. OPTIONAL REDUCTIONS. Revco may, from time to time on any Business Day, voluntarily reduce the amount of the Total Revolving Credit Commitment Amount; PROVIDED that all such reductions shall require at least two Business Days' prior written notice to the Administrative Agent and be permanent, and any partial reduction of the Total Revolving Credit Commitment Amount shall be in a minimum amount of $5,000,000 and in an integral multiple of $1,000,000. SECTION 2.06. MANDATORY REVOLVING CREDIT COMMITMENT REDUCTIONS. The Total Revolving Credit Commitment Amount shall (to the extent not already reduced pursuant to Section 2.05.), without further action, automatically and permanently be reduced on the third anniversary of the Amendment Effective Date to $600,000,000 and on the fourth anniversary of the Amendment Effective Date to $525,000,000; PROVIDED, HOWEVER, that on the Revolving Credit Commitment Termination Date, the Total Revolving Credit Commitment Amount shall be automatically and permanently reduced to $0. SECTION 2.07. FEES. Revco agrees to pay the fees set forth in this Section 2.03. SECTION 2.08. REVOLVING NONUSE FEE. Revco agrees to pay to the Administrative Agent for the account of the 18 10 Revolving Lenders (ratably according to their respective Revolving Percentages) the applicable Nonuse Fee per annum on the daily average Unused Total Revolving Credit Commitment Amount for the period from the Amendment Effective Date to the Revolving Credit Commitment Termination Date, payable in arrears on each Quarterly Payment Date and the Revolving Credit Commitment Termination Date for the period then ended for which such fee has not theretofore been paid. SECTION 2.09. LETTER OF CREDIT FEES. Revco agrees to pay the following letter of credit fees: (a) with respect to Commercial Letters of Credit (i) to the Administrative Agent for the account of the Revolving Lenders (ratably according to their respective Revolving Percentages) the Commercial LC Fee per annum on the daily average Letter of Credit Outstandings with respect thereto, and (ii) to the Administrative Agent for the account of the applicable LC Issuer, the Fronting Fee with respect thereto, payable in arrears on a calendar quarter basis within five Business Days after Revco receives from the Administrative Agent an invoice for or notice of the fees which have accrued during the calendar quarter then ended and on the Revolving Credit Commitment Termination Date for each period then ended for which such fees have not theretofore been paid; (b) with respect to Standby Letters of Credit (other than Financial Letters of Credit) (i) to the Administrative Agent for the account of the Revolving Lenders (ratably according to their respective Revolving Percentages) the Non financial Standby LC Fee per annum on the daily average Letter of Credit Outstandings with respect thereto, and (ii) to the Administrative Agent for the account of the applicable LC Issuer, the Fronting Fee with respect thereto, 19 11 payable in arrears on a calendar-quarter basis within five Business Days after Revco receives from the Administrative Agent an invoice for or notice of the fees which have accrued during the calendar quarter then ended and on the Revolving Credit Commitment Termination Date for each period then ended for which such fees have not theretofore been paid; (c) with respect to Financial Letters of Credit (i) to the Administrative Agent for the account of the Revolving Lenders (ratably according to their respective Revolving Percentages) the Financial Standby LC Fee per annum on the daily average Letter of Credit Outstandings with respect thereto, and (ii) to the Administrative Agent for the account of the applicable LC Issuer, the Fronting Fee with respect thereto, payable in arrears on a calendar quarter basis within five Business Days after Revco receives from the Administrative Agent an invoice for or notice of the fees which have accrued during the calendar quarter then ended and on the Revolving Credit Commitment Termination Date for each period then ended for which such fees have not theretofore been paid; and (d) to the Administrative Agent for the account of the applicable LC Issuer, upon demand from time to time, all customary fees and administrative expenses of such LC Issuer as set forth in such LC Issuer's published schedule of such fees and expenses then in effect which are charged or incurred from time to time in connection with the issuance, maintenance, modification (if any), negotiation and administration of each Letter of Credit. SECTION 2.10. ADMINISTRATIVE AGENT FEE. Revco agrees to pay to the Administrative Agent, for its sole account, the fees required by the Fee Letter. SECTION 2.11. AMENDMENT FEE. On the Amendment Effective Date, Revco agrees to pay the Administrative Agent for the account of the Revolving Lenders (ratably according to their respective Revolving Percentages), an amendment fee 20 12 equal to .05% of the Total Revolving Credit Commitment Amount. SECTION 2.12. INCREASED COSTS. If any Regulatory Change imposes, modifies or deems applicable any capital adequacy, capital maintenance or similar requirement (including a request or requirement which affects the manner in which any Revolving Lender (or the Person controlling such Revolving Lender) allocates capital resources to its commitments, including its Revolving Credit Commitments hereunder) and as a result thereof, in the reasonable opinion of such Revolving Lender, the rate of return on such Revolving Lender's (or the Person controlling such Revolving Lender's) capital as a consequence of its Revolving Credit Commitments or Loans, or the issuance of or participation in any Letter of Credit hereunder, is reduced to a level below that which such Revolving Lender (or the Person controlling such Revolving Lender) could have achieved but for such circumstances, then and in each such case upon notice from time to time by such Revolving Lender to Revco (with a copy to the Administrative Agent and the Managing Agents), Revco shall pay to such Revolving Lender such additional amount or amounts as shall compensate such Revolving Lender (or the Person controlling such Revolving Lender) for such reduction in its rate of return. Such notice shall contain a statement of such Revolving Lender as to any such additional amount or amounts (including calculations thereof in reasonable detail) which shall, in the absence of manifest error, be conclusive evidence of the matters stated therein and be binding upon Revco. SECTION 2.13. SWING LINE. (a) Upon Revco's request, and subject to the terms and conditions of this Agreement, the Managing Agents (in such capacity, each a "Swing Line Lender") may, in their sole discretion, on and after the Amendment Effective Date and prior to the Revolving Credit Commitment Termination Date, provide to Revco a swing line credit facility (the "Swing Line") of up to $30,000,000; PROVIDED that no Managing Agent shall in any event be permitted to make any Loan (each a "Swing Loan") under the Swing Line if, after giving effect thereto, (i) the sum of the then aggregate outstanding principal amount of all Revolving Loans, Bid Loans and Swing Loans plus the then aggregate amount of all Letter of Credit Outstandings would exceed the Total Revolving Credit Commitment Amount, (ii) the outstanding principal balance of the Swing Loans made by such Managing Agent would exceed 21 13 $15,000,000, or (iii) the then aggregate outstanding principal amount of all Swing Loans made by the Managing Agents would exceed $30,000,000. No Managing Agent shall at any time be obligated to make any Swing Loan. (b) Each request for Swing Loans shall be made from time to time by Revco delivering a Swing Loan Request therefor to the Administrative Agent at or before 10:00 a.m., San Francisco time, on any Business Day. Each Managing Agent making the requested Swing Loan shall deposit with the Administrative Agent same day funds, at or before 12:00 noon, San Francisco time, in an amount equal to such Managing Agent's Swing Loan. On the terms and subject to the conditions of this Agreement, after timely receipt of such funds, each Swing Loan shall be disbursed on the Business Day on which the request therefor was timely made, in same day funds by wire transfer to such transferee(s), or to such account(s) of Revco, as Revco shall have specified in the request therefor. Swing Loans shall be in an aggregate minimum principal amount of $1,000,000 and an integral multiple of $100,000. (c) Each Swing Loan outstanding under the Swing Line shall accrue interest at a rate per annum quoted to the Administrative Agent by the Managing Agent making such Swing Loan from time to time which interest shall be payable quarterly in arrears on each Quarterly Payment Date and upon demand therefor, if made earlier, and shall be payable to the Administrative Agent for the sole and ratable account of the applicable Managing Agent; PROVIDED that, notwithstanding any other provision of this Agreement, each Swing Loan shall bear interest for a minimum of one day. (d) The principal and interest outstanding under the Swing Line shall be due and payable: (i) on demand made at any time upon one Business Day's prior notice to Revco furnished at or before 9:00 a.m., San Francisco time; and (ii) in any event on the Revolving Credit Commitment Termination Date; PROVIDED that, if no Event of Default shall have occurred and be continuing at the time of such demand, then unless Revco notifies the Administrative Agent that it will repay such Swing Loans, Revco shall, immediately after Revco 22 14 learns of such demand, if and to the extent that Revco is permitted to borrow Revolving Loans under the terms of this Agreement at the time of such demand, be deemed to have submitted a Revolving Loan Request for Revolving Loans at the Base Rate in an amount necessary to repay the amount demanded, and the provisions of Section 3.02 concerning the minimum principal amounts and integral multiples thereof required for Borrowings of Revolving Loans shall not apply to Revolving Loans made pursuant to this Section 2.13(d). (e) Revco may, from time to time on any Business Day, make a voluntary prepayment, in whole or in part, of the outstanding principal amount of any Swing Loans, without incurring any premium or penalty; PROVIDED that (i) each such voluntary prepayment shall require prior written notice given to the Administrative Agent no later than 10:00 a.m., San Francisco time, on the day on which Revco intends to make a voluntary prepayment, and (ii) each such voluntary prepayment shall be in a minimum amount of $1,000,000 and in an integral multiple of $100,000 (or, if less, the aggregate outstanding principal amount of all Swing Loans then outstanding). (f) Each Revolving Lender shall be deemed to have unconditionally and irrevocably purchased a pro rata risk participation from each Managing Agent in such Managing Agent's Swing Loans, without recourse or warranty (except that its outstanding Swing Loans in fact were made by such Managing Agent, have not been repaid, and have not been sold or assigned by such Managing Agent) in an amount equal to such Revolving Lender's Revolving Percentage of such Swing Loans. In addition, from and after the date that any Revolving Lender funds such participation, such Revolving Lender shall, to the extent of its Revolving Percentage, be entitled to receive a ratable portion of any payment of principal and interest received by the Managing Agents on account of such Swing Loans, payable promptly to such Revolving Lender upon such receipt. (g) The Managing Agents may at any time, without the consent of Revco, upon one Business Day's notice to Revco terminate the Swing Line and cause Revolving Loans to be made by the Revolving Lenders in an aggregate amount 23 15 equal to the amount of principal and interest outstanding under the Swing Line, and the conditions precedent set forth in Article VI and Section 3.02. shall not apply to such Revolving Loans. The proceeds of such Revolving Loans shall be paid to the Managing Agents to retire the outstanding principal and interest under the Swing Line. (h) The Managing Agents shall not, without the approval of all Revolving Lenders, make a Swing Loan if the Managing Agents then have actual knowledge that a Default has occurred and is continuing. SECTION 2.14. BID BORROWINGS. In addition to Borrowings pursuant to Sections 2.01 and 2.13, each Revolving Lender severally agrees that Revco may, as set forth in Section 2.15, from time to time request the Revolving Lenders prior to the Revolving Credit Commitment Termination Date to submit offers to make Bid Loans to Revco; PROVIDED, HOWEVER, that the Revolving Lenders may, but shall have no obligation to, submit such offers and Revco may, but shall have no obligation to, accept any such offers, and, if such offers are accepted by Revco, to make such Bid Loans; and PROVIDED FURTHER, that at no time shall the outstanding aggregate principal amount of all Bid Loans made by all Revolving Lenders, plus the outstanding aggregate principal amount of all Revolving Loans and Swing Loans plus the then aggregate amount of Letter of Credit Outstandings exceed the Total Revolving Credit Commitment Amount. No Bid Loan shall reduce or affect the Revolving Credit Commitment or the Revolving Percentage of the Revolving Lender that made such Bid Loan. The principal and interest payable under a Bid Loan shall be due and payable on the last day of the applicable Interest Period. SECTION 2.15. PROCEDURE FOR BID BORROWINGS. (a) When Revco wishes to request the Revolving Lenders to submit offers to make Bid Loans hereunder, it shall transmit to the Bid Loan Agent by telephone call followed promptly by facsimile transmission a Competitive Bid Request so as to be received no later than (x) 10:00 a.m., San Francisco time, four Business Days prior to the date of a proposed Bid Borrowing in the case of a LIBOR Auction, or (y) 10:00 a.m., 24 16 San Francisco time, one Business Day prior to the date of a proposed Bid Borrowing in the case of an Absolute Rate Auction, specifying: (i) the date of such Bid Borrowing, which shall be a Business Day; (ii) the aggregate amount of such Bid Borrowing, which shall be a minimum amount of $5,000,000 or in integral multiples of $1,000,000 in excess thereof; (iii) whether the Competitive Bids requested are to be for LIBOR Bid Loans or Absolute Rate Bid Loans or both; and (iv) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of "Interest Period" herein. Subject to Section 2.15(c), Revco may not request Competitive Bids for more than three Interest Periods in a single Competitive Bid Request. (b) Upon receipt of a Competitive Bid Request, the Bid Loan Agent will promptly send to the Revolving Lenders by facsimile transmission an Invitation for Competitive Bids, which shall constitute an invitation by Revco to each Revolving Lender to submit Competitive Bids offering to make the Bid Loans to which such Competitive Bid Request relates in accordance with this Section 2.15. (c) (i) Each Revolving Lender may at its discretion submit a Competitive Bid containing an offer or offers to make Bid Loans in response to any Invitation for Competitive Bids. Each Competitive Bid must comply with the requirements of this Section 2.15(c) and must be submitted to the Bid Loan Agent by facsimile transmission at the Bid Loan Agent's office for notices set forth on the signature pages hereto not later than (A) 6:30 a.m., San Francisco time, three Business Days prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (B) 6:30 a.m., San Francisco time, on the proposed date of Borrowing, in the case of an Absolute Rate Auction; PROVIDED that Competitive Bids submitted by BAI (or any Affiliate of BAI) in the capacity of a Revolving Lender may be submitted, and may only be submitted, if the BAI or such Affiliate notifies the Bid Agent of the terms of the offer or offers contained 25 17 therein not later than (A) 6:15 a.m., San Francisco time, three Business Days prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (B) 6:15 a.m., San Francisco time, on the proposed date of Borrowing, in the case of an Absolute Rate Auction. (ii) Each Competitive Bid shall be in substantially the form of Exhibit B-3, specifying therein: (A) the proposed date of Borrowing; (B) the principal amount of each Bid Loan for which such Competitive Bid is being made, which principal amount (x) may be equal to, greater than or less than the Revolving Credit Commitment of the quoting Revolving Lender, (y) must be $1,000,000 or in multiples thereof, and (z) may not exceed the principal amount of Bid Loans for which Competitive Bids were requested but may exceed such Revolving Lender's Revolving Percentage of the Total Revolving Credit Commitment Amount; (C) in case Revco elects a LIBOR Auction, the margin above or below LIBOR (the "LIBOR Bid Margin") offered for each such Bid Loan, expressed in multiples of 1/1000th of one basis point to be added to or subtracted from the applicable LIBOR and the Interest Period applicable thereto; (D) in case Revco elects an Absolute Rate Auction, the rate of interest per annum expressed in multiples of 1/1000th of one basis point (the "Absolute Rate") offered for each such Bid Loan and the Interest Period applicable thereto; and (E) the identity of the quoting Revolving Lender. A Competitive Bid may contain up to three separate offers by the quoting Revolving Lender with respect to each Interest Period specified in the related Invitation for Competitive Bids. 26 18 (iii) Any Competitive Bid shall be disregarded if it: (A) is not substantially in conformity with Exhibit B-3 or does not specify all of the information required by Section 2.15(c)(ii); (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Competitive Bids; or (D) arrives after the time set forth in Section 2.15(c)(i). (d) Promptly on receipt and not later than 7:15 a.m., San Francisco time, three Business Days prior to the proposed date of Borrowing in the case of a LIBOR Auction, or 7:15 a.m., San Francisco time, on the proposed date of Bid Borrowing, in the case of an Absolute Rate Auction, the Bid Loan Agent will notify Revco of the terms (i) of any Competitive Bid submitted by a Revolving Lender that is in accordance with Section 2.15(c), and (ii) of any Competitive Bid that amends, modifies or is otherwise inconsistent with a previous Competitive Bid submitted by such Revolving Lender with respect to the same Competitive Bid Request. Any such subsequent Competitive Bid shall be disregarded by the Bid Loan Agent unless such subsequent Competitive Bid is submitted solely to correct a manifest error in such former Competitive Bid and only if received within the times set forth in Section 2.15(c). The Bid Loan Agent's notice to Revco shall specify (A) the aggregate principal amount of Bid Loans for which offers have been received for each Interest Period specified in the related Competitive Bid Request, (B) the respective principal amounts and LIBOR Bid Margins or Absolute Rates, as the case may be, so offered and (C) the identity of the Revolving Lenders offering such Bids Loans. Subject only to the provisions of Sections 4.04, 4.05 and 6.02 hereof and the provisions of this subsection (d), any Competitive Bid shall be irrevocable except with the written consent of the Bid Loan Agent given on the written instructions of Revco. (e) Not later than 7:45 a.m., San Francisco time, three Business Days prior to the proposed date of Borrowing, 27 19 in the case of a LIBOR Auction, or 7:45 a.m., San Francisco time, on the proposed date of Borrowing, in the case of an Absolute Rate Auction, Revco shall notify the Bid Loan Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to Section 2.157(d). Revco shall be under no obligation to accept any offer and may choose to reject all offers. In the case of acceptance, such notice shall specify the aggregate principal amount of offers for each Interest Period that is accepted. Revco may accept any Competitive Bid in whole or in part; PROVIDED that: (i) the aggregate principal amount of each Bid Borrowing may not exceed the applicable amount set forth in the related Competitive Bid Request; (ii) the principal amount of each Bid Borrowing must be $1,000,000 or in any multiple thereof; (iii) acceptance of offers may only be made on the basis of ascending LIBOR Bid Margins or Absolute Rates within each Interest Period, as the case may be; and (iv) Revco may not accept any offer that is described in Section 2.15(c)(iii) or that otherwise fails to comply with the requirements of this Agreement. (f) If offers are made by two or more Revolving Lenders with the same LIBOR Bid Margins or Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Bid Loans in respect of which such offers are accepted shall be allocated by the Bid Loan Agent among such Revolving Lenders as nearly as possible (in such multiples, not less than $1,000,000, as the Bid Loan Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determination by the Bid Loan Agent of the amounts of Bid Loans shall be conclusive in the absence of manifest error. (g) (i) The Bid Loan Agent will promptly notify each Revolving Lender having submitted a Competitive Bid if its offer has been accepted and, if its offer has been accepted, of the amount of the Bid Loan or Bid Loans to be made by it on the date of the Bid Borrowing. 28 20 (ii) Each Revolving Lender, which has received notice pursuant to Section 2.15(g)(i) that its Competitive Bid has been accepted, shall make the amounts of such Bid Loans available to the Bid Loan Agent for the account of Revco at the Bid Loan Agent's Payment Office, by 11:00 a.m., San Francisco time, in the case of Absolute Rate Bid Loans, and by 11:00 a.m., San Francisco time, in the case of LIBOR Bid Loans, on such date of Bid Borrowing, in funds immediately available to the Bid Loan Agent for the account of Revco at the Bid Loan Agent's Payment Office. (iii) Promptly following each Bid Borrowing, the Bid Loan Agent shall notify each Revolving Lender of the ranges of bids submitted and the highest and lowest Bids accepted for each Interest Period requested by Revco and the aggregate amount borrowed pursuant to such Bid Borrowing. (iv) From time to time, Revco and the Revolving Lenders shall furnish such information to the Bid Loan Agent as the Bid Loan Agent may request relating to the making of Bid Loans, including the amounts, interest rates, dates of borrowings and maturities thereof, for purposes of the allocation of amounts received from Revco for payment of all amounts owing hereunder. (h) If, on or prior to the proposed date of Bid Borrowing, the Revolving Credit Commitments have not been terminated and if, on such proposed date of Borrowing all applicable conditions to funding referenced in Sections 4.04, 4.05 and 6.02 are satisfied, the Revolving Lenders whose offers Revco has accepted will fund each Bid Loan so accepted. ARTICLE III LOANS AND NOTES --------------- SECTION 3.01. LOAN PROCEDURE. Borrowings of Loans (other than Bid Loans and Swing Loans) shall be made in accordance with this Section 3.01. SECTION 3.02. REVOLVING LOAN REQUESTS. By delivering to the Administrative Agent a duly completed and executed Revolving Loan Request therefor, in the case of a proposed Borrowing of Eurodollar Rate Loans, at or before 10:00 a.m., San Francisco time, on a Business Day not less 29 21 than three and not more than five Business Days before the proposed Borrowing Date therefor provided that in the case of a Borrowing of Eurodollar Loans to be made on the Amendment Effective Date such notice shall be given three Business Days prior to the Amendment Effective Date, or in the case of a proposed Borrowing of Base Rate Loans, at or before 10:00 a.m., San Francisco time, on three Business Day next preceding the proposed Borrowing Date therefor, Revco may request that the Revolving Lenders make Revolving Loans to Revco on the Borrowing Date specified therefor in such request, in each case in a minimum aggregate principal amount of $5,000,000 and integral multiple of $100,000 (or, if less, the Unused Total Revolving Credit Commitment Amount) for Base Rate Loans and a minimum aggregate principal amount of $5,000,000 and integral multiple of $100,000 for Eurodollar Rate Loans. After giving effect to any Borrowing, there may not be more than 10 Interest Periods in effect in respect of all Eurodollar Rate Loans. Revco shall be allowed, for Eurodollar Borrowings on the Amendment Effective Date only, to select Interest Periods of approximately one week, two weeks, three weeks and one month. On the terms and subject to the conditions of this Agreement, each Loan described above shall be disbursed promptly after the Administrative Agent's receipt from each Revolving Lender of such Revolving Lender's Revolving Percentage of the Borrowing then requested by Revco on the applicable Borrowing Date therefor, in same day funds by wire transfer to such transferee(s), or to such account(s) of Revco, as Revco shall have specified in the applicable request therefor; PROVIDED that the Administrative Agent shall disburse such funds as it has received from the Revolving Lenders to Revco no later than 12:00 noon, San Francisco time. The Administrative Agent shall promptly notify the Revolving Lenders of the receipt of each request pursuant to this Section. Each request for Loans made pursuant to this Section or Section 2.13(b) shall constitute Revco's representation and warranty made to the Administrative Agent, the Managing Agents and the Revolving Lenders that all of the applicable conditions contained in Article VI will, after giving effect to such Borrowing or any Swing Loans requested pursuant to Section 2.13(b), be satisfied, and the making available of such Loans to Revco shall be subject to the satisfaction of the applicable conditions of 30 22 Article VI; PROVIDED that, notwithstanding the foregoing, no Managing Agent shall at any time be obligated to make any Swing Loan. SECTION 3.03. FUNDING OF BORROWINGS. Subject to the terms and conditions of this Agreement, each Borrowing shall be made on the Borrowing Date specified in the request duly made therefor. On each Borrowing Date, each Revolving Lender shall deposit with the Administrative Agent same day funds, at or before 11:00 a.m., San Francisco time, in an amount equal to such Revolving Lender's Revolving Percentage of the amount of such requested Borrowing, such deposit to be made to such account as the Administrative Agent shall specify from time to time by notice to the Revolving Lenders. After timely receipt of such funds, the Administrative Agent shall promptly on such Borrowing Date make such funds available to Revco by wire transfer to such transferee(s), or to such account(s) of Revco, as Revco shall have specified in the request therefor. No Revolving Lender's obligation to make any Loan shall be affected by any other Revolving Lender's failure to make any such Loan. SECTION 3.04. NOTES. All Loans made by the Revolving Lenders shall be evidenced: (a) in the case of the Revolving Loans, by a promissory note (the "Revolving Note") of Revco, dated the Amendment Effective Date and substantially in the form of Exhibit A-1, payable to the order of the Administrative Agent for the account of the Revolving Lenders ratably in accordance with their respective Revolving Percentages and in a maximum principal amount equal to the initial Total Revolving Credit Commitment Amount; (b) in the case of the Swing Loans, by a promissory note (the "Swing Note") of Revco, dated the Amendment Effective Date and substantially in the form of Exhibit A-2, payable to the order of the Administrative Agent for the account of the Managing Agents ratably in accordance with their respective Swing Loans and in a maximum principal amount equal to $30,000,000; and (c) in the case of the Bid Loans, by a promissory note (the "Bid Note") of Revco, dated the Amendment Effective Date and substantially in the form of 31 23 Exhibit A-3, payable to the order of the Administrative Agent for the account of the Revolving Lenders that made such Bid Loans ratably in accordance with their respective Bid Loans. Revco hereby irrevocably authorizes the Administrative Agent to make (or cause to be made) appropriate notations on the schedule attached to each Note of Revco (or on a continuation of such schedule attached to such Note and made a part thereof), or in the Administrative Agent's other records, which notations shall evidence, INTER ALIA, the date of, the outstanding principal amount of, and the interest rate (including any applicable conversions thereof pursuant to Section 4.02) applicable to, the Loans evidenced thereby. Such notations indicating the outstanding principal amount of the Loans shall, in the absence of manifest error, be conclusive evidence of the principal amount thereof owing and unpaid, but the failure to record or any error in recording any such amount on such schedule (or on such continuation), or in such other records, shall not limit or otherwise affect the obligations of Revco hereunder or under such Note to make payment of principal of or interest on such Loans when due. The Administrative Agent will hold the original Notes. Nothing in this Section 3.04 shall be construed or deemed to limit or otherwise prejudicially affect the rights of any Revolving Lender or any Managing Agent to repayment of its Loans and other Obligations owing to such Revolving Lender or Managing Agent or to commence or maintain any action, suit or other proceeding therefor against Revco or other Obligor without the necessity of joining the Administrative Agent as party thereto, which rights Revco hereby acknowledges and agrees to. SECTION 3.05. PRINCIPAL PAYMENTS. Repayments and prepayments of principal of the Loans (other than Bid Loans and Swing Loans) shall be made in accordance with this Section 3.03. SECTION 3.06. REPAYMENTS AND PREPAYMENTS. Revco will make payment in full of all unpaid principal of each Loan to Revco on the Stated Maturity Date therefor. Prior thereto, Revco: (a) may, from time to time on any Business Day, make a voluntary prepayment, in whole or in part, of 32 24 the outstanding principal amount of any Loans (other than Bid Loans) made as part of any particular Borrowing, provided that: (i) no such prepayment of any such Eurodollar Rate Loans may be made which, after giving effect thereto, would result in the aggregate outstanding principal amount thereof being less than $5,000,000 or other than an integral multiple of $100,000; (ii) each such voluntary prepayment shall require (x) in the case of Base Rate Loans, prior written notice thereof given to the Administrative Agent no later than 10:00 a.m., San Francisco time, on the Business Day next preceding the day on which Revco intends to make such voluntary prepayment and (y) in the case of Eurodollar Rate Loans, at least three but no more than five Business Days' prior written notice thereof to the Administrative Agent; and (iii) each such voluntary prepayment of Base Rate Loans shall be in a minimum amount of $1,000,000 and an integral multiple of $100,000 (or, if less, the outstanding principal amount of all Revolving Loans or Swing Loans, as the case may be, then outstanding and designated in Revco's notice as being prepaid); (b) shall make a mandatory prepayment of the Revolving Loans until paid in full in an amount equal to the amount of Net Cash Proceeds, if any, which either HSI or Revco would otherwise be required to use to offer to repurchase HSI Notes or 9-1/8% Notes, as the case may be; PROVIDED that, to the extent the amount of Net Cash Proceeds which must be applied as a mandatory repayment exceeds the then outstanding Revolving Loans, Revco shall make a Borrowing of Revolving Loans equal to such excess immediately prior to making such mandatory prepayment; (c) shall, if the then aggregate outstanding principal amount of all Revolving Loans, Bid Loans and Swing Loans plus the then aggregate amount of all Letter of Credit Outstandings shall exceed the Total Revolving Credit Commitment Amount as reduced at any 33 25 time pursuant to Section 2.02, immediately repay Revolving Loans in a principal amount equal to such excess; and (d) shall, immediately upon any acceleration of the maturity of any Loans pursuant to Section 9.02 or 9.03, repay such Loans. Each repayment and prepayment of any Loans made pursuant to this Section shall be without premium or penalty, except in the case of Eurodollar Rate Loans as required by Section 4.07. All voluntary prepayments of the Loans shall not constitute a credit toward other prepayments required under clauses (b) through (d). Any mandatory prepayments made under any of clauses (b) through (d) shall not constitute a credit toward prepayments required to be made under any other of such clauses and shall be applied to such Loans pro rata (according to the respective amounts thereof). No voluntary prepayment or mandatory prepayment under Section 3.06.(b) of principal of the Revolving Loans shall cause a reduction in the Total Revolving Credit Commitment Amount. SECTION 3.07. LOAN APPLICATION. Any prepayment of the Loans shall be applied first to the portion of such Loans being maintained as Base Rate Loans and then to the portion of such Loans being maintained as Eurodollar Rate Loans (unless Revco shall elect a different application between Base Rate Loans and Eurodollar Rate Loans in its notice of such prepayment). SECTION 3.08. INTEREST PAYMENTS. Interest on Loans shall accrue and be payable in accordance with this Section 3.04. SECTION 3.09. RATES. From the date any Loan is made to the date the principal amount of such Loan is repaid in full, interest shall accrue on the outstanding principal amount of such Loan at a rate per annum: (a) in the case of the Revolving Loans: (i) on that portion of the outstanding principal amount thereof maintained from time to time as a Base Rate Loan, equal to the Base Rate from time to time in effect; and 34 26 (ii) on that portion of the outstanding principal amount thereof maintained from time to time as a Eurodollar Rate Loan, during each Interest Period applicable thereto, equal to the sum of the Eurodollar Rate (Adjusted) for such Interest Period plus the Applicable Interest Margin; (b) in the case of the Bid Loans: (i) for Absolute Rate Bid Loans, at the Absolute Rate, and (ii) for LIBOR Bid Loans, at LIBOR plus the LIBOR Bid Margin; and (c) in the case of Swing Loans, as-provided in Section 2.05(c). SECTION 3.10. DEFAULT RATE. Notwithstanding the provisions of Section 3.09, after the occurrence of any Default described in Section 9.1.1 or Section 9.1.4 and, at the election of the Required Lenders, after the occurrence of any other Event of Default, until the time when such Default or Event of Default shall have been cured or waived or the principal of and interest on all Loans and all other monetary Obligations arising under this Agreement, the Notes or any other Credit Document shall have been paid in full, Revco shall pay interest (after as well as before judgment) on the principal amount of all Loans and Reimbursement Obligations and, to the fullest extent permitted by Applicable Law, on such other Obligations, respectively, of Revco at a rate per annum (the "Default Rate") which is determined: (a) by increasing the fees set forth in Sections 2.09(a)(i), 2.09(b)(i) and 2.09(c)(i) and, in the case of the principal amount of the Loans, each of the interest rates set forth in Sections 3.09(a) and 3.09(b), by 2.0% per annum; and (b) in the case of Reimbursement Obligations and such other Obligations, at a rate per annum equal to the sum of the Base Rate from time to time in effect, which shall in any event be not less than the Base Rate in effect on the date on which such Default or Event of Default occurred, plus 3.5% per annum. 35 27 SECTION 3.11. PAYMENT DATES. Interest accrued on each Loan and each Reimbursement Obligation shall be payable, without duplication: (a) on the Stated Maturity Date of such Loan or Reimbursement Obligation; (b) with respect to any portion of any Eurodollar Rate Loan prepaid pursuant to Section 3.06, on the date of such prepayment; (c) in the case of any Revolving Loan: (i) on that portion of the outstanding principal amount thereof maintained as a Base Rate Loan, on each Quarterly Payment Date, commencing with the first such Quarterly Payment Date following the Amendment Effective Date; and (ii) on that portion of the outstanding principal amount thereof maintained as a Eurodollar Rate Loan, on the last day of each applicable Interest Period and, if such Interest Period shall exceed 3 months, on the day of the third month of such Interest Period numerically corresponding to the first day of such Interest Period (or, if there is no such numerically corresponding day in such third month, on the last Business Day of such third month); (d) in the case of any Bid Loan, at the time(s) specified in the applicable Bid Offer, or, if no such time is so specified, on the Stated Maturity Date thereof; and (e) on that portion of any Loans the maturity of which is accelerated pursuant to Section 9.2 or Section 9.3, immediately upon such acceleration. Interest accrued on the principal amount of each Loan or Reimbursement Obligation or other monetary Obligation arising under this Agreement or any other Credit Document after the date such amount is due and payable (whether on the Stated Maturity Date, upon acceleration or otherwise) shall be payable upon demand. 36 28 SECTION 3.12. RATE DETERMINATIONS. (a) All determinations by the Administrative Agent of any rate of interest applicable to any Loan or other monetary Obligation shall be conclusive and binding in the absence of manifest error. (b) Each Reference Bank agrees to furnish to the Administrative Agent timely information for the purpose of determining the Eurodollar Rate (Adjusted). If either of the Reference Banks shall fail to furnish such information to the Administrative Agent for any such interest rate, the Administrative Agent shall determine such interest rate on the basis of the information furnished by the remaining Reference Bank. SECTION 3.13. TAXES, ETC. (a) All payments by Revco to any Revolving Lender (or to the Administrative Agent for the account of any such Revolving Lender) in respect of any Obligation shall be made free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding franchise taxes, taxes imposed on or measured by any Revolving Lender's net income or receipts and any United States withholding tax that may be imposed on interest paid to any Initial Lender which is a Non-United States Person as a result of such interest ceasing to be "effectively connected" with the conduct of a trade or business of such Initial Lender in the United States within the meaning of section 881 of the Code (such non-excluded items being called "Taxes"). In the event that any withholding or deduction from any payment to be made by Revco to any Revolving Lender is required in respect of any Taxes pursuant to any Applicable Law, rule or regulation, then Revco will (i) pay to the relevant authorities the full amount required to be so withheld or deducted; (ii) pay such additional amounts as may be necessary in order that the net amount received by such Revolving Lender after such deduction or withholding (including any required deduction or withholding on such additional amounts) shall equal the amount such Revolving Lender would have received had no such deduction or withholding been made; and 37 29 (iii) promptly forward to the Administrative Agent (for delivery to such Revolving Lender) an official receipt or other documentation satisfactory to the Administrative Agent evidencing such payment to such authorities. Moreover, if any Taxes are directly asserted against any such Revolving Lender with respect to any payment made in respect of any Obligation, such Revolving Lender may pay such Taxes, and Revco shall, promptly upon receipt of notice from such Revolving Lender, pay such additional amount (including any penalties, interest or expenses) as may be necessary in order that the net amount received by such Revolving Lender after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such Revolving Lender would have received had no such Taxes been asserted; PROVIDED that Revco shall not be required to pay any such penalty, interest or expense to the extent that such Revolving Lender's liability for such item is attributable solely to the actions of such Revolving Lender. For purposes of this Section 3.13, a distribution hereunder by the Administrative Agent or any Revolving Lender to or for the account of any Revolving Lender shall be deemed to be a payment by Revco. (b) Each Revolving Lender which is a Non-United States Person agrees (to the extent it is permitted to do so under the laws and any applicable double taxation treaties of the United States, the jurisdiction of its incorporation and the jurisdictions in which its Domestic Office and its Eurodollar Office are located) to execute and deliver to the Administrative Agent for delivery to Revco, before the first scheduled payment date in each taxable year of such Revolving Lender, two copies of either (1) a United States Internal Revenue Service Form 1001, (2) a United States Internal Revenue Service Form 4224 together with a United States Internal Revenue Service Form W-9, or (3) a United States Internal Revenue Service Form W-8 together with a certificate substantially in the form of Exhibit J and containing any additional certifications as the Administrative Agent may reasonably require to establish such Revolving Lender's exemption from United States Federal Taxes pursuant to section 881(c) or 871(h) of the Code (or any successor Forms, as appropriate), and such other and further Forms which Revco may reasonably request, in each case properly completed and properly claiming complete or 38 30 partial, as the case may be, exemption from withholding and deduction of United States Federal Taxes. SECTION 3.14. PAYMENTS, COMPUTATIONS, ETC. SECTION 3.15. ALLOCATION. Except as set forth herein, all payments by Revco pursuant to this Agreement, the Notes or any other Credit Document, whether in respect of principal of or interest on Loans or Reimbursement Obligations, shall be made by Revco to the Administrative Agent for the account of the applicable Revolving Lenders ratably according to the respective unpaid principal amounts of the applicable Loans made by them or to their respective participation interests in such Reimbursement Obligations, as the case may be. All other amounts payable to the Administrative Agent, any LC Issuer, any Managing Agent, or any Revolving Lender under this Agreement or any other Credit Document (except under Sections 2.10, 2.12, 4.6 and 4.7) shall be paid to the Administrative Agent for the account of the Person entitled thereto. SECTION 3.16. TIME, PLACE AND MANNER OF PAYMENT. All payments hereunder or under the Notes or any other Credit Document shall be made, without setoff or counterclaim, not later than 11:00 a.m., San Francisco time, on the date due, in same day or immediately available funds, to such account as the Administrative Agent shall specify from time to time by notice to Revco. As an administrative convenience to Revco, the Administrative Agent shall debit Revco's account no. 7701543 maintained with the Administrative Agent on the due date once the Administrative Agent has determined that there are sufficient funds in such account. Funds received after that time shall be deemed to have been received by the Administrative Agent on the next following Business Day. The Administrative Agent shall promptly remit in same day or immediately available funds to each Revolving Lender its share, if any, of such payments received by the Administrative Agent for the account of such Revolving Lender. SECTION 3.17. COMPUTATION. Interest on Base Rate Loans shall be computed on the basis of a 365 or, where applicable, 366-day year. All other interest and fees hereunder or under the Notes or any other Credit Document shall be computed on the basis of the actual number of days (including the first day but excluding the last day, other than for fees relating to Letters of Credit for which the 39 31 last day shall be included) occurring during the period for which such interest or fee is payable over a year comprised of 360 days. SECTION 3.18. BUSINESS DAY ADJUSTMENT. Whenever any payment shall otherwise be due on a day which is not a Business Day, such payment shall (except as otherwise required by clause (ii) of the definition of the term "Interest Period" with respect to payments then due of principal of or interest on any Loans being maintained as Eurodollar Rate Loans) be made on the immediately succeeding Business Day. SECTION 3.19. PRORATION OF PAYMENTS. If any Revolving Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of principal of or interest on any Loans, Reimbursement Obligations or other Obligations then due in excess of such Revolving Lender's pro rata share of payments then or concurrently therewith obtained thereon by all Revolving Lenders and such amount is not required to be turned over to the Collateral Agent pursuant to Section 3.04 of the Collateral Agency Agreement, then such Revolving Lender shall purchase from the other Revolving Lenders such participations in such Loans, Reimbursement Obligations or other Obligations held by them as shall be necessary to cause such purchasing Revolving Lender to share the excess payment or other recovery ratably with each of them; provided that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Revolving Lender, each Revolving Lender which has sold a participation to the purchasing Revolving Lender shall repay to the purchasing Revolving Lender the purchase price to the extent of such recovery together with an amount equal to such selling Revolving Lender's ratable share (according to the proportion of (a) the amount of such selling Revolving required repayment to the purchasing Revolving Lender to (b) the total amount so recovered from the purchasing Revolving Lender) of any interest or other amount paid or payable by the purchasing Revolving Lender in respect of the total amount 40 32 so recovered. Revco agrees that any Revolving Lender so purchasing a participation from another Revolving Lender pursuant to this Section 3.19 may, to the fullest extent permitted by Applicable Law, exercise all its rights of payment (including pursuant to Section 3.20) with respect to such participation as fully as if such Revolving Lender were the direct creditor of Revco in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Revolving Lender receives a secured claim in lieu of a setoff to which this Section 3.19 applies, such Revolving Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Revolving Lenders entitled under this Section 3.19 to share in the benefits of any recovery on such secured claim. SECTION 3.20. SETOFF. In addition to and not in limitation of any rights of any Revolving Lender under Applicable Law, each Revolving Lender shall, upon the occurrence of any Default described in Section 9.1.1 or 9.1.4 or, with the consent of the Required Lenders, upon the occurrence of any other Event of Default, have the right to appropriate and apply to the payment of the Obligations owing to it (whether directly or as a participant) and then due and unpaid, and, as security for such Obligations, Revco hereby grants to each Revolving Lender a continuing security interest in and lien upon, any and all balances, credits, deposits, accounts or moneys of Revco then or thereafter maintained with such Revolving Lender (or an Affiliate of such Revolving Lender) or participant (excluding, however, any such account expressly designated as an escrow or similar account all of the amounts on deposit in which are being held for the benefit of a Person other than Revco or any of its Subsidiaries); provided that any such appropriation and application shall be subject to the provisions of Section 3.19. Each Revolving Lender agrees promptly to notify Revco and the Administrative Agent after any such setoff and application made by such Revolving Lender; PROVIDED that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Revolving Lender under this Section 3.20 are in addition to other rights and remedies (including other rights of setoff) which such Revolving Lender may have. SECTION 3.21. USE OF PROCEEDS. Revco shall apply the proceeds of each Borrowing, and shall utilize any Letter of Credit, for ongoing working capital and general corporate 41 33 purposes of Revco and its Subsidiaries, including the making of any loans or capital contributions by Revco to its Subsidiaries. SECTION 3.22. PAYMENTS BY REVCO. (a) All payments to be made by Revco shall be made without set-off, recoupment or counterclaim. Except as otherwise expressly provided herein, all payments by Revco shall be made to the Administrative Agent for the account of the Revolving Lenders, and shall be made in Dollars and in immediately available funds, no later than 3:00 p.m., San Francisco time, on the date specified herein. The Administrative Agent will promptly distribute to each Revolving Lender its Revolving Percentage (or other applicable share as expressly provided herein) of such payment in like funds as received. Any payment received by the Administrative Agent later than 3:00 p.m., San Francisco time, shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue. (b) Unless the Administrative Agent receives notice from Revco prior to the date on which any payment is due to the Revolving Lenders that Revco will not make such payment in full as and when required, the Administrative Agent may assume that Revco has made such payment in full to the Administrative Agent on such date in immediately available funds and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Revolving Lender on such due date an amount equal to the amount then due such Revolving Lender. If and to the extent Revco has not made such payment in full to the Administrative Agent, each Revolving Lender shall repay to the Administrative Agent on demand such amount distributed to such Revolving Lender, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Revolving Lender until the date repaid. SECTION 3.23. PAYMENTS BY THE REVOLVING LENDERS TO THE ADMINISTRATIVE AGENT. (a) Unless the Administrative Agent receives notice from a Revolving Lender on or prior to the Amendment Effective Date or, with respect to any Borrowing after the Amendment Effective Date, at least one Business Day prior to the date of such Borrowing, that such Revolving Lender will not make available as and when required hereunder to the Administrative Agent for the account of Revco the amount of that Revolving Lender's 42 34 Revolving Percentage of the Borrowing, the Administrative Agent may assume that each Revolving Lender has made such amount available to the Administrative Agent in immediately available funds on the Borrowing Date and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, make available to Revco on such date a corresponding amount. If and to the extent any Revolving Lender shall not have made its full amount available to the Administrative Agent in immediately available funds and the Administrative Agent in such circumstances has made available to Revco such amount, then such Revolving Lender shall on the Business Day following such Borrowing Date make such amount available to the Administrative Agent, together with interest at the Federal Funds Rate for each day during such period. A notice of the Administrative Agent submitted to any Revolving Lender with respect to amounts owing under this subsection (a) shall be conclusive, absent manifest error. If such amount is so made available, such payment to the Administrative Agent shall constitute such Revolving Lender's Revolving Loan on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to the Administrative Agent on the Business Day following the Borrowing Date, the Administrative Agent will notify Revco of such failure to fund and, upon demand by the Administrative Agent, Revco shall pay such amount to the Administrative Agent for the Administrative Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Revolving Loans comprising such Borrowing. (b) The failure of any Revolving Lender to make any Revolving Loan on any Borrowing Date shall not relieve any other Revolving Lender of any obligation hereunder to make a Revolving Loan on such Borrowing Date, but no Revolving Lender shall be responsible for the failure of any other Revolving Lender to make the Revolving Loan to be made by such other Revolving Lender on any Borrowing Date. ARTICLE IV INTEREST RATE OPTIONS --------------------- SECTION 4.01. BORROWING ELECTIONS. At the election of Revco pursuant to a Revolving Loan Request delivered pursuant to Section 3.01, any Borrowing may be 43 35 made as Base Rate Loans or Eurodollar Rate Loans. Each Revolving Loan Request shall be irrevocable and binding upon Revco. SECTION 4.02. CONTINUATION AND CONVERSION ELECTIONS. At the election of Revco pursuant to a Continuation/Conversion Notice delivered by delivering to the Administrative Agent a duly completed and executed Continuation/Conversion Notice at or before 10:00 a.m., San Francisco time, on any Business Day, Revco may elect, from time to time on not less than three nor more than five Business Days' notice: (a) that all, or any portion in a minimum aggregate amount of $5,000,000 and an integral multiple of $100,000, of any Borrowing of Revolving Loans be converted from Base Rate Loans into Eurodollar Rate Loans on any Business Day or, subject to Section 4.7, from Eurodollar Rate Loans into Base Rate Loans; and (b) on the expiration of the Interest Period applicable to any Eurodollar Rate Loans comprising all or part of any Borrowing, that all, or any portion in an aggregate minimum principal amount of $5,000,000 and an integral multiple of $100,000, of such Borrowing be continued as Eurodollar Rate Loans (in the absence of delivery of such notice under either this clause or clause (a) above, Revco will be deemed to have elected that such Eurodollar Rate Loans be converted into Base Rate Loans); provided that: (i) no portion of the outstanding principal amount of any Revolving Loans may be continued as, or be converted into, Eurodollar Rate Loans when any Default has occurred and is continuing provided that Eurodollar Rate Loans may be converted into Base Rate Loans unless an Event of Default has occurred and is continuing; and (ii) no portion of the outstanding principal amount of any Revolving Loans may be made or continued as, or be converted into, Eurodollar Rate Loans if, after giving effect thereto, the Interest Period applicable thereto shall extend beyond the date of any scheduled reduction of the Total Revolving Credit Commitment Amount pursuant to Section 2.06 unless a 44 36 sufficient principal amount of Revolving Loans is then being maintained as Base Rate Loans or Eurodollar Rate Loans having an Interest Period ending on or prior to the date of any such scheduled reduction to permit such payment to be applied in full to Base Rate Loans; and (iii) no portion of the outstanding principal amount of any Revolving Loans may be made or continued as, or converted into, Eurodollar Rate Loans or Base Rate Loans if, after giving effect to such action, the aggregate principal amount of any Eurodollar Rate Loans having a particular Interest Period is less than $5,000,000 or is not an integral multiple of $100,000. SECTION 4.03. FUNDING. In the event Revco elects to obtain any Revolving Loans as Eurodollar Rate Loans pursuant to Section 4.01, or elects to continue any Eurodollar Rate Loans or convert any portion of the principal amount of any Base Rate Loans to Eurodollar Rate Loans pursuant to Section 4.02, each Revolving Lender may, if it so elects, fulfill its obligation to make or continue any portion of the principal amount of any Revolving Loan as, or to convert any portion of the principal amount of any Revolving Loan into, a Eurodollar Rate Loan in accordance with any election made by Revco by causing a foreign branch or Affiliate of such Revolving Lender or an international banking facility created by such Revolving Lender to make such Eurodollar Rate Loan; provided that in such event such Eurodollar Rate Loan shall be deemed to have been made by such Revolving Lender, and the obligation of Revco to repay such Eurodollar Rate Loan shall nevertheless be to such Revolving Lender and shall be deemed to be held by such Revolving Lender, to the extent of such Eurodollar Rate Loan, for the account of such foreign branch, Affiliate or international banking facility. In addition, Revco hereby consents and agrees that, for purposes of any determination to be made for purposes of this Agreement (including Sections 4.04, 4.05, 4.06 and 4.07), it shall be conclusively assumed that each Revolving Lender elected to fund all Eurodollar Rate Loans by purchasing Dollar deposits in its Eurodollar Office's interbank eurodollar market. SECTION 4.04. EURODOLLAR RATE LENDING UNLAWFUL. If, as the result of any Regulatory Change, any Revolving Lender shall determine (which determination shall be conclusive and binding on Revco) that it is unlawful for such Revolving Lender to make, continue, or maintain any 45 37 Revolving Loan as, or to convert any Revolving Loan into, a Eurodollar Rate Loan, the obligations of such Revolving Lender to make, continue, or maintain, as the case may be, any portion of the principal amount of any Revolving Loans as, or to convert any Revolving Loans into, Eurodollar Rate Loans shall, upon such determination (and telephonic notice thereof confirmed in writing to the Administrative Agent and Revco), forthwith be suspended until such Revolving Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist, and all Eurodollar Rate Loans of such Revolving Lender shall automatically convert into Base Rate Loans. SECTION 4.05. EURODOLLAR DEPOSITS UNAVAILABLE. If prior to the date on which all or any portion of the principal amount of any Revolving Loan is to be made or continued as, or be converted into, Eurodollar Rate Loans, the Administrative Agent shall have determined (and telephone notice thereof, confirmed in writing, shall have been given to Revco and the Revolving Lenders) that: (a) Dollar deposits in the relevant amount and for the relevant Interest Period are not available to any Reference Bank in the interbank eurodollar market; or (b) by reason of circumstances affecting the interbank eurodollar market, adequate means do not exist for ascertaining the interest rate applicable hereunder to such Eurodollar Rate Loan, then, the obligations of all Revolving Lenders under Sections 4.1 and 4.2 to make or continue any portion of the principal amount of any Revolving Loans as, or to convert any Revolving Loans into, Eurodollar Rate Loans shall forthwith be suspended until the Administrative Agent shall notify Revco and the Revolving Lenders that the circumstances causing such suspension no longer exist. SECTION 4.06. INCREASED EURODOLLAR RATE LOAN COSTS, ETC. Revco agrees to reimburse each Revolving Lender for any increase in the cost to such Revolving Lender of making, continuing or maintaining (or of its obligation to make, continue or maintain) any portion of the principal amount of any of its Revolving Loans as, or of converting (or of its obligation to convert) any portion of the principal amount of any of its Revolving Loans into, Eurodollar Rate Loans and for any reduction in the amount of 46 38 any sum receivable by such Revolving Lender hereunder in respect of making, continuing or maintaining any portion of the principal amount of any of its Revolving Loans as, or converting any portion of the principal amount of any Revolving Loans into, Eurodollar Rate Loans. In any such event, such Revolving Lender shall promptly notify the Administrative Agent and Revco thereof, stating the reasons therefor and the additional amount required fully to compensate such Revolving Lender for such increased cost or reduced amount. Such additional amounts shall be payable in full by Revco directly to such Revolving Lender within 5 days of its receipt of such notice. A statement as to any such increased cost or reduced amount or any change therein (including calculations thereof in reasonable detail) shall be submitted by such Revolving Lender to the Administrative Agent and Revco and shall, in the absence of manifest error, be conclusive and binding on Revco. SECTION 4.07. FUNDING LOSSES. In the event any Revolving Lender shall incur any loss or expense (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Revolving Lender to make, continue or maintain any portion of the principal amount of any Revolving Loan as, or to convert any portion of the principal amount of any Revolving Loan into, a Eurodollar Rate Loan) as a result of: (a) repayment or prepayment of the principal amount of any Eurodollar Rate Loans on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Section 3.3 or otherwise; (b) any conversion of all or any portion of the outstanding principal amount of any Eurodollar Rate Loans to Base Rate Loans pursuant to Section 4.2 or 4.4 prior to the expiration of the Interest Period then applicable thereto; (c) any Revolving Loans not being made as Eurodollar Rate Loans in accordance with the request therefor or any Eurodollar Rate Loans not being prepaid in accordance with the notice therefor; or (d) any Revolving Loans not being continued as, or converted into, Eurodollar Rate Loans in accordance with the notice applicable thereto, 47 39 then, upon the request of such Revolving Lender to Revco (with a copy to the Administrative Agent), Revco shall pay directly to such Revolving Lender such amount as will (in the reasonable determination of such Revolving Lender) reimburse such Revolving Lender for such loss or expense. A statement as to any such loss or expense (including calculations thereof in reasonable detail) shall be submitted by such Revolving Lender to the Administrative Agent and Revco and shall, in the absence of manifest error, be conclusive and binding on Revco. ARTICLE V LETTERS OF CREDIT ----------------- SECTION 5.01. LC ISSUANCE REQUEST. By concurrently delivering an LC Issuance Request to the applicable LC Issuer at or before 8:00 a.m., San Francisco time, on any Business Day (provided that LC Issuance Requests with respect to Commercial Letters of Credit may be given at any time during such Business Day). Revco may request, on not less than 2 Business Days' prior notice, that such LC Issuer issue, on any Business Day on or after the Amendment Effective Date and before the Revolving Credit Commitment Termination Date, an irrevocable letter of credit in such form as may be requested by Revco and approved by such LC Issuer (a "Letter of Credit"), solely for the purposes described in Section 3.09. Each Letter of Credit shall by its terms: (a) be issued in a Stated Amount which, when added to the then aggregate amount of Letter of Credit Outstandings, does not exceed $100,000,000; and (b) be stated to expire on a date no later than the earlier of (i) the Revolving Credit Commitment Termination Date; PROVIDED that, not later than 5 Business Days prior to the Revolving Credit Commitment Termination Date, Revco shall cash collateralize, under arrangements satisfactory to the Required Lenders, the Letters of Credit in an amount equal to 105% of the then aggregate Stated Amount of all Letters of Credit, and 48 40 (ii) the first anniversary of the date of issuance of such Letter of Credit. SECTION 5.02. ISSUANCE OF LETTERS OF CREDIT. Subject to the terms and conditions of this Agreement (including Article VI), the applicable LC Issuer shall issue a Letter of Credit in accordance with the request duly made therefor. Prior to the issuance of any Letter of Credit, Revco shall have properly completed all of such LC Issuer's required standard letter of credit documentation. The applicable LC Issuer will make available to the beneficiary thereunder the original of any Letter of Credit which it issues hereunder. On each Friday that is a Business Day (or, if any Friday is not a Business Day, on the next succeeding Business Day), each LC Issuer shall provide the Administrative Agent with a list of its respective outstanding Letters of Credit. The Administrative Agent will furnish to Revco and each Revolving Lender, on a monthly basis, a summary of such list, including such Revolving Lender's Revolving Percentage of all Letter of Credit Outstandings. SECTION 5.03. OTHER REVOLVING LENDERS' PARTICIPATIONS. Upon the issuance of any Letter of Credit, and without further action, each Revolving Lender shall be deemed to have irrevocably purchased, to the extent of its Revolving Percentage, an undivided participation interest in such Letter of Credit (including the Contingent Liability and any Reimbursement Obligation with respect thereto), and such Revolving Lender shall, to the extent of its Revolving Percentage, be responsible to reimburse the applicable LC Issuer promptly for Reimbursement Obligations which have not been reimbursed by Revco in accordance with Section 5.05. Upon notice from the Administrative Agent of Revco's failure to reimburse any Reimbursement Obligation, each Revolving Lender shall deposit with the Administrative Agent same day funds, at or before 11:00 a.m., San Francisco time (if notice is received prior to 8:00 a.m., San Francisco time) in an amount equal to such Revolving Lender's Revolving Percentage of such Reimbursement Obligation. In addition, such Revolving Lender shall, to the extent of its Revolving Percentage, be entitled to receive a ratable portion, payable promptly to such Revolving Lender upon receipt by the Administrative Agent (and, if such payment is received by the Administrative Agent prior to 8:00 a.m., San Francisco time, on any Business Day, payable to such 49 41 Revolving Lender in same day funds on such Business Day), of: (a) the letter of credit fees payable pursuant to Section 2.09(a)(i), 2.09(b)(i) and 2.09(c)(i); and (b) interest payable pursuant to Section 5.4. SECTION 5.04. DISBURSEMENTS. Each LC Issuer will notify Revco and the Administrative Agent promptly of each demand or presentment for payment under any Letter of Credit issued by such LC Issuer, together with notice of the date (the "Disbursement Date") on which such payment shall be made. Subject to the terms and provisions of such Letter of Credit, the applicable LC Issuer shall make such payment to the beneficiary (or its designee) of such Letter of Credit. Prior to 8:00 a.m., San Francisco time, on the Disbursement Date, Revco will reimburse the Administrative Agent, for the account of the applicable LC Issuer for all amounts which such LC Issuer has disbursed or will disburse under such Letter of Credit (the "Disbursement"), together with interest thereon at a rate per annum equal to the sum of the Base Rate from time to time in effect plus a margin of 3.5% per annum for the period from the Disbursement Date to the date of such reimbursement. SECTION 5.05. REIMBURSEMENT. Revco's obligation (the "Reimbursement Obligation") under Section 5.4 to reimburse the Administrative Agent, for the account of the applicable LC Issuer with respect to any Disbursement (including interest thereon) and, upon Revco's failure to reimburse the Administrative Agent, for the account of such LC Issuer, each Revolving Lender's obligation under Section 5.3 to reimburse the Administrative Agent, for the account of such LC Issuer, shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which Revco or such Revolving Lender, as the case may be, may have or have had against such LC Issuer, any Revolving Lender or the beneficiary of such Letter of Credit, including any defense based upon the occurrence of any Default or Event of Default, any draft, demand, certificate or other document proving to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged, the failure of any demand or presentation for any Disbursement to conform to the terms of the applicable Letter of Credit or any non-application or misapplication by 50 42 the beneficiary under such Letter of Credit of the proceeds of such Disbursement, or the legality, validity, form, regularity or enforceability of such Letter of Credit; PROVIDED that nothing herein shall adversely affect the right of Revco or such Revolving Lender, as the case may be, after paying in full its Reimbursement Obligation under Section 5.5 or its obligations under Section 5.3, to commence any proceeding against such LC Issuer for any wrongful Disbursement made by the LC Issuer under a Letter of Credit as a result of acts or omissions constituting gross negligence or wilful misconduct on the part of such LC Issuer. SECTION 5.06. DEEMED DISBURSEMENTS. Upon the occurrence and during the continuation of an Event of Default, then: (a) automatically in the case of an Event of Default described in Section 9.1.4, and at the election of the Required Lenders in the case of any other Event of Default, an amount equal to that portion of the Letter of Credit Outstandings attributable to the then aggregate amount which is undrawn and available under all outstanding Letters of Credit shall, without demand upon or notice to Revco, be deemed to have been paid or disbursed by the applicable LC Issuer (notwithstanding that such amount may not in fact have been so paid or disbursed); and (b) upon notification by the Administrative Agent to Revco of its obligations under this Section 5.06, Revco shall be immediately obligated to reimburse the Administrative Agent for the account of the applicable LC Issuer for the amount deemed to have been so paid or disbursed by such LC Issuer. Any amounts so payable by Revco pursuant to this Section 5.6 shall be deposited in cash with the Administrative Agent and held as collateral security for the Obligations in connection with any Letter of Credit and shall be invested by the Administrative Agent in Cash Equivalent Investments the interest on which shall be held as collateral security for such Obligations and applied to pay such Obligations then due and unpaid. At such time when all Events of Default shall have been cured or waived, the Administrative Agent shall return to Revco all amounts then on deposit with the Administrative Agent pursuant to this Section 5.06 51 43 (including any income from Cash Equivalent Investments), net of any amounts applied to the payment of any such Obligations. SECTION 5.07. NATURE OF REIMBURSEMENT OBLIGATIONS. Revco and, to the extent set forth in Section 5.03, each Revolving Lender shall assume all risks of the acts, omissions or misuse of each Letter of Credit by the beneficiary thereof. Neither the Administrative Agent nor the applicable LC Issuer (except to the extent of its own gross negligence or wilful misconduct as set forth in Section 5.05) shall be responsible for: (a) the form, validity, sufficiency, accuracy, genuineness or legal effect of any Letter of Credit issued by it or any document submitted by any party in connection with the application for and issuance of such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (b) the form, validity, sufficiency, accuracy, genuineness or legal effect of any Instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof in whole or in part, which may prove to be invalid or ineffective for any reason; (c) failure of the beneficiary under any Letter of Credit to comply fully with conditions required in order to demand payment under such Letter of Credit; (d) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise; or (e) any loss or delay in the transmission or otherwise of any document or draft required in order to make a Disbursement under any such Letter of Credit. None of the foregoing shall affect, impair, limit or prevent the vesting of any of the rights or powers granted to the Administrative Agent, the applicable LC Issuer or any Revolving Lender hereunder (including pursuant to Section 11.04). In furtherance and extension, and not in limitation or derogation of any of the foregoing, any action taken or 52 44 omitted to be taken by the Administrative Agent or the applicable LC Issuer in good faith and without gross negligence shall be binding upon Revco and each such Revolving Lender, and shall not put the Administrative Agent or the applicable LC Issuer under any resulting liability to Revco or any such Revolving Lender, as the case may be. ARTICLE VI AGREEMENT EFFECTIVENESS AND CONDITIONS TO CREDIT EXTENSIONS - ----------------------------------------------------------- SECTION 6.01. AMENDMENT EFFECTIVE DATE. This Agreement shall be and become effective on the date (the "Amendment Effective Date") on which Revco, the Revolving Lenders and the Agents shall have executed and delivered this Agreement and the applicable Assignor Lenders shall have executed and delivered Schedule III to this Agreement and the prior or concurrent satisfaction of each of the requirements set forth in this Section 6.01. SECTION 6.02. RESOLUTIONS, ETC. The Administrative Agent, the Managing Agents and such Revolving Lenders as shall have requested receipt of same prior to the Amendment Effective Date shall have received: (a) a certificate, dated the Amendment Effective Date, of the Secretary or any Assistant Secretary of each Obligor as to: (i) no amendments to the Organic Documents of such Obligor since July 16, 1994 except as noted in such certificate; (ii) resolutions of the Board of Directors of such Obligor then in full force and effect, authorizing the execution, delivery and performance of each Credit Document to be executed by it and the related transactions contemplated in connection therewith; and (iii) the incumbency and signatures of those of its officers authorized to act with respect to each Credit Document to be executed by it; 53 45 upon which certificate each Revolving Lender, including each Assignee (whether or not it shall have then become a party hereto), may conclusively rely until it shall have received a further certificate of the Secretary of such Obligor replacing or amending such prior certificate; and (b) such other documents (certified if requested) as the Administrative Agent, any Managing Agent or the Required Lenders may reasonably request with respect to any Organic Document, Contractual Obligation or Approval. SECTION 6.03. NOTES; GUARANTIES. The Administrative Agent shall have received: (a) the Revolving Note, the Swing Note and the Bid Note, in each case duly executed and delivered pursuant to Section 3.02; and (b) the HSI Guaranty duly executed and delivered by HSI. SECTION 6.04. NO CONTEST, ETC. No litigation, arbitration, governmental investigation, proceeding or inquiry shall, on the Amendment Effective Date, be pending or, to the knowledge of Revco, threatened which: (a) seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated by or in connection with this Agreement; or (b) might, in the opinion of the Required Lenders, if adversely determined, be reasonably expected to have a Materially Adverse Effect, or be materially detrimental to the interests of any of the parties hereto with respect to any of the transactions contemplated hereby. SECTION 6.05. NO MATERIALLY ADVERSE EFFECT. No event or events which, individually or in the aggregate, in the opinion of the Required Lenders, could have a Materially Adverse Effect shall have occurred since May 28, 1994. SECTION 6.06. CERTIFICATE AS TO WARRANTIES, NO DEFAULT, ETC. The Administrative Agent shall have received 54 46 a certificate, dated the Amendment Effective Date, of Revco executed on its behalf by the chief executive or financial Authorized Officer of Revco stating that on and as of the Amendment Effective Date: (a) all representations and warranties set forth in Article VII are true and correct in all material respects; and (b) no Default has occurred and is continuing. SECTION 6.07. OPINIONS OF COUNSEL. The Administrative Agent shall have received opinion letters, dated the Amendment Effective Date and addressed to the Administrative Agent, the Bid Agent, the Managing Agents and all Revolving Lenders, from: (a) Jack A. Staph, Esq., Senior Vice President, Secretary and General Counsel of Revco, substantially in the form of Exhibit F-1; and (b) Mayer, Brown & Platt, counsel to the Administrative Agent, the Bid Agent and the Managing Agents, substantially in the form of Exhibit F-2. SECTION 6.08. CLOSING FEES, EXPENSES, ETC. The Administrative Agent shall have received for the account of each Managing Agent, or for the account of each Revolving Lender or Assignor Lender, as the case may be, all fees then due and payable under Sections 2.10 and 2.11 and all other fees due through July 24, 1995 (with fees accrued from July 24, 1995 until the Amendment Effective Date being paid on August 4, 1995) and all costs and expenses which have been then invoiced and are payable pursuant to Section 11.3 and the Term Loans (as defined in the Existing Credit Agreement) shall have been repaid or refinanced as Revolving Loans. SECTION 6.09. HSI CREDIT AGREEMENT TERMINATED. The Administrative Agent shall have received evidence, reasonably satisfactory to the Administrative Agent, that the HSI Credit Extensions have been, or concurrently with the making of the initial Loans will be, funded in full and the HSI Credit Agreement has been terminated. SECTION 6.10. ALL CREDIT EXTENSIONS. Notwithstanding any other provision of this Agreement, 55 47 without duplication of any conditions precedent required to be satisfied pursuant to Section 6.01, the obligations of the Revolving Lenders to make any Credit Extension on or after the Amendment Effective Date shall be subject to the prior or concurrent satisfaction of each of the conditions precedent set forth in this Section 6.02. SECTION 6.11. COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC. The representations and warranties set forth in Article VII shall have been true and correct as of the date initially made, and both before and after giving effect to the making of any such Credit Extension (but, if any Default of the nature referred to in Section 9.1.6 shall have occurred with respect to any other Indebtedness, without giving effect to the application, directly or indirectly, of the proceeds of such Credit Extension): (a) subject to Section 8.02(e), such representations and warranties shall be true and correct in all material respects with the same effect as if then made (except to the extent any such representation or warranty relates solely to an earlier date); and (b) no Default shall have occurred and be continuing. SECTION 6.12. CREDIT REQUEST, ETC. The Administrative Agent shall have received a Revolving Loan Request, a Swing Loan Request or an LC Issuance Request, as applicable. Each of the delivery or deemed delivery of any such Revolving Loan Request, Swing Loan Request, or LC Issuance Request, as the case may be, shall constitute and be deemed a representation and warranty by Revco that on the date of such request for a Credit Extension, and before and after giving effect to the application of any Credit Extensions requested thereby, all statements set forth in Section 6.11. are true and correct. SECTION 6.13. SATISFACTORY LEGAL FORM. All corporate and other actions or proceedings taken or required to be taken in connection with the transactions contemplated hereby and all agreements, instruments and documents executed or submitted pursuant hereto by or on behalf of Revco shall be reasonably satisfactory in form and substance to the Administrative Agent, the Managing Agents and their counsel; all certificates and opinions delivered pursuant to 56 48 this Article VI shall be addressed to the Administrative Agent, the Managing Agents and each Revolving Lender, or the Administrative Agent, the Managing Agents and each Revolving Lender shall be expressly entitled to rely thereon; the Administrative Agent, the Managing Agents and their counsel shall have received all information, and such number of counterpart originals or such certified or other copies of such Instruments, as the Managing Agents or their counsel may reasonably request; and all legal matters incident to the transactions contemplated by this Agreement shall be reasonably satisfactory to counsel to the Administrative Agent and the Managing Agents. ARTICLE VII REPRESENTATIONS AND WARRANTIES ------------------------------ In order to induce the Revolving Lenders, the Administrative Agent and the Managing Agents to enter into this Agreement, to engage in the transactions contemplated herein and in the other Credit Documents and to make and issue Credit Extensions hereunder, Revco and each Obligor, as the case may be, represents and warrants unto, the Administrative Agent, the Managing Agents and each Revolving Lender as set forth in this Article VII. SECTION 7.01. ORGANIZATION, POWER, AUTHORITY, ETC. Revco is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the failure so to qualify may have a Materially Adverse Effect, and has full power and authority and holds all material requisite governmental licenses, permits and other approvals to own and hold under lease its property and to conduct its business substantially as currently conducted by it. Each Subsidiary of Revco is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the failure so to qualify may have a Materially Adverse Effect, and has full power and authority and holds all material requisite governmental licenses, permits and other approvals to own and hold under lease its property and to conduct its business substantially as currently conducted by it. Revco 57 49 has full power and authority to execute, deliver and perform its Obligations under this Agreement, the Notes and each other Credit Document to which it is or is to be a party, to obtain Credit Extensions or incur Obligations hereunder or thereunder and to grant the Liens provided in the Pledge Agreement. Each Obligor has full power and authority to execute, deliver and perform its Obligations under each Credit Document to which it is or is to be a party. SECTION 7.02. DUE AUTHORIZATION, NONCONTRAVENTION, ETC. The execution and delivery by Revco of this Agreement, the Notes and each other Credit Document executed or to be executed by it, the performance by Revco of its Obligations hereunder and thereunder, all Credit Extensions obtained hereunder by Revco and all other actions incidental to any thereof have been duly authorized by all necessary action, do not and will not conflict with, result in any violation of, or constitute any default under, any provision of any Organic Document or Contractual Obligation of Revco or any law or governmental regulation or court decree or order and will not result in or require the creation or imposition of any Lien on any of Revco's properties pursuant to the provisions of any Contractual Obligation. The execution and delivery by each Obligor of each Credit Document executed or to be executed by it, the performance by such Obligor of its Obligations hereunder and thereunder and all other actions incidental to any thereof have been duly authorized by all necessary action, do not and will not conflict with, result in any violation of, or constitute any default under, any provision of any Organic Document or Contractual Obligation of such Obligor or any law or governmental regulation or court decree or order and will not result in or require the creation or imposition of any Lien on such obligor's properties pursuant to the provisions of any Contractual Obligation. SECTION 7.03. GOVERNMENT APPROVAL, REGULATION, ETC. Except as set forth in Item 7.3 ("Approvals") of the Disclosure Schedule, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery or performance by Revco or any Obligor of this Agreement, the Notes or any other Credit Document to which it is or is to be a party or the consummation of the transactions contemplated hereby or thereby, except for authorizations, approvals, actions, notices or filings which have been duly obtained or made and 58 50 are in full force and effect. Neither Revco nor any Subsidiary is an "investment company" within the meaning of the Investment Company Act of 1940 or a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935. SECTION 7.04. VALIDITY, ETC. This Agreement has been duly executed and delivered by Revco and constitutes the legal, valid and binding obligation of Revco enforceable in accordance with its terms; and each of the Notes and each other Credit Document to which Revco is or is to be a party will, on the due execution and delivery thereof, constitute the legal, valid and binding obligation of Revco, enforceable in accordance with its terms. Each Credit Document to which any Obligor is a party to has been duly executed and delivered by such Obligor and constitutes the valid and binding obligation of such Obligor enforceable in accordance with its terms; and each Credit Document to which any Obligor is to be a party will, on the due execution and delivery thereof, constitute the legal, valid and binding obligation of such Obligor, enforceable in accordance with its terms. SECTION 7.05. FINANCIAL INFORMATION. (a) The audited consolidated balance sheet as of May 28, 1994 and the related audited consolidated statements of earnings, stockholders' equity and cash flow for the Fiscal Year then ended, of Revco and its Subsidiaries, audited by Arthur Andersen & Co., have been prepared in accordance with GAAP consistently applied throughout the period involved and present fairly the financial condition of Revco and its Subsidiaries as of the date thereof and the results of their operations and cash flows for the period then ended. Neither Revco nor any of its Subsidiaries had on the date thereof any material Contingent Liability or liabilities for taxes, long-term leases or unusual forward or long-term commitments which are not reflected in such financial statements or in the notes thereto. (b) The unaudited consolidated balance sheet as of February 4, 1995 and the related unaudited statements of earnings, stockholders' equity and cash flow for the nine Fiscal Months then ended, of Revco and its Subsidiaries, have been prepared in accordance with GAAP consistently applied (except as expressly disclosed therein) 59 51 throughout the period involved and present fairly (subject to normal and customary year-end audit adjustments) the financial condition of Revco and such Subsidiaries as at the date thereof and the results of their operations for the period then ended. Neither Revco nor any of its Subsidiaries had on the date thereof any material Contingent Liability or liabilities for taxes, long-term leases or unusual forward or long-term commitments which are not reflected in such financial statements or in the notes thereto. SECTION 7.06. NO MATERIALLY ADVERSE EFFECT. Since May 28, 1994, no event or events have occurred which, individually or in the aggregate, has resulted or could result in a Materially Adverse Effect. SECTION 7.07. LITIGATION, ETC. There is no pending or, to the best knowledge of Revco, threatened litigation, action, proceeding, order, investigation or claim, at law or in equity or before or by any governmental department, commission, board, bureau, agency or instrumentality affecting Revco or any of its Subsidiaries, or any of their respective properties, assets or revenues which, if determined adversely to Revco or such Subsidiaries, might result in or constitute a Materially Adverse Effect, except as disclosed in Item 7.7 ("Litigation") of the Disclosure Schedule; and none of them is subject to any arbitration proceedings under collective bargaining agreements or otherwise or any governmental investigations or inquiries. SECTION 7.08. REGULATIONS G, T, U AND X. Neither Revco nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock, and less than 25% of the assets of Revco, individually and on a consolidated basis with its Subsidiaries, consists of margin stock. The proceeds of any Loans made hereunder will not be used for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulations G, T, U or X. Terms for which meanings are provided in F.R.S. Board Regulations G, T, U and X have such meanings when such terms are used in this Section. SECTION 7.09. PENSION AND WELFARE PLANS. Except as disclosed in Item 7.9 ("Employee Benefit Plans") of the Disclosure Schedule, neither Revco nor any member of the 60 52 Controlled Group maintains or contributes to any Pension Plans, Multiemployer Plans or Welfare Plans. During the 12- consecutive-month period prior to the date of the execution and delivery of this Agreement and prior to the date of any Credit Extension hereunder, no steps have been taken to terminate any Pension Plan and no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under section 302(f) of ERISA. Except as disclosed in Item 7.9 ("Employee Benefit Plans") of the Disclosure Schedule, no condition exists or event or transaction has occurred with respect to any Pension Plan which could be reasonably expected to result or which has resulted in the incurrence by Revco or any member of the Controlled Group of any material liability, fine or penalty. Except as disclosed in Item 7.9 ("Employee Benefit Plans") of the Disclosure Schedule, neither Revco nor any member of the Controlled Group has any Contingent Liability with respect to any post-retirement welfare benefit under a Welfare Plan or other arrangement, other than liability arising under applicable state insurance laws, for continuation coverage described in Part 6 of Title I of ERISA, under employment contracts listed in such Item or severance benefits payable in cash pursuant to an arrangement described in such Item. SECTION 7.10. SUBSIDIARIES. Revco has no Subsidiaries except those Subsidiaries which are shown in Item 7.10 ("Existing Subsidiaries") of the Disclosure Schedule or permitted to have been acquired or organized after the Amendment Effective Date in accordance with this Agreement. SECTION 7.11. TAXES. Each of Revco and each of its Subsidiaries has filed all tax returns and reports required by law to have been filed by it; all such tax returns are true and correct in all material respects; and Revco and each of its Subsidiaries has paid or withheld (as applicable) all taxes and governmental charges thereby shown to be owing or required to be withheld, except any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. 61 53 SECTION 7.12. ABSENCE OF DEFAULT. Neither Revco nor any of its Subsidiaries is: (a) in default in the payment of any amount in respect of (or in the performance of any obligation applicable to) any Indebtedness in an outstanding principal amount of $10,000,000 or more; or (b) in default under any governmental regulation or court decree or order or under any law if such default could have a Materially Adverse Effect. SECTION 7.13. LABOR CONTROVERSIES. There are no labor controversies pending or, to the best knowledge of Revco, threatened against Revco or any of its Subsidiaries, which, if adversely determined, might have a Materially Adverse Effect. SECTION 7.14. CAPITALIZATION. Item 7.14 ("Ownership of Revco") of the Disclosure Schedule sets forth, as of the date of and based upon the most recent filings pursuant to Section 13(d) and Section 13(g) of the Securities Exchange Act of 1934, as amended, each record and, to the knowledge of Revco, beneficial owner of 5% or more of the outstanding shares of each class of equity securities of Revco registered under Section 12 of the Securities Exchange Act of 1934. SECTION 7.15. OWNERSHIP OF PROPERTIES. Each of Revco and each of its Subsidiaries has good and marketable title to, or a valid leasehold interest in, all of its properties and assets, real and personal, of any nature whatsoever, free and clear of all. Liens, except Permitted Liens. SECTION 7.16. ENVIRONMENTAL WARRANTIES. Except as set forth in Item 7.16 ("Environmental Matters") of the Disclosure Schedule: (a) all facilities and property (including underlying groundwater) owned or leased by Revco or any of its Subsidiaries have been, and continue to be, owned or leased by Revco and its Subsidiaries in material compliance with all Environmental Laws; (b) there have been no past, and there are no pending or, to the knowledge of Revco, threatened 62 54 (i) claims, complaints, notices or requests for information received by Revco or any of its Subsidiaries with respect to any alleged violation of any Environmental Law, or (ii) complaints, notices or inquiries to Revco or any of its Subsidiaries regarding potential liability under any Environmental Law; (c) there have been no Releases of Hazardous Materials at, on or under any property now or previously owned or leased by Revco or any of its Subsidiaries during such ownership or lease or, to the knowledge of Revco, prior thereto that, singly or in the aggregate, have, or may reasonably be expected to have, a Materially Adverse Effect; (d) Revco and its Subsidiaries have been issued and are in material compliance with all permits, certificates, approvals, licenses and other authorizations relating to environmental matters and necessary for their businesses; (e) no property now or, to the knowledge of Revco, previously owned or leased by Revco or any of its Subsidiaries is listed or proposed for listing (with respect to owned property only) on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list of sites requiring investigation or clean-up; (f) there are no underground storage tanks, active or abandoned, including petroleum storage tanks, on or under any property now or previously owned or leased by Revco or any of its Subsidiaries that, singly or in the aggregate, have, or may reasonably be expected to have, a Materially Adverse Effect; (g) neither Revco nor any of its Subsidiaries has directly transported or directly arranged for the transportation of any Hazardous Material to any location which is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list or which is the subject of federal, state or local enforcement actions or other investigations which may lead to material claims against Revco or such Subsidiary thereof for any 63 55 remedial work, damage to natural resources or personal injury, including claims under CERCLA; (h) there are no polychlorinated biphenyls or friable asbestos present at any property now or previously owned or leased by Revco or any of its Subsidiaries that, singly or in the aggregate, have, or may reasonably be expected to have, a Materially Adverse Effect; and (i) to the knowledge of Revco, no conditions exist at, on or under any property now or previously owned or leased by Revco or any of its Subsidiaries which, with the passage of time or the giving of notice or both, would give rise to liability under any Environmental Law. SECTION 7.17. ACCURACY OF INFORMATION. All factual information heretofore or contemporaneously furnished by or on behalf of Revco in writing to any Agent or any Revolving Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all other such factual information hereafter furnished by or on behalf of Revco to any Agent or any Revolving Lender will be, true and accurate in every material respect on the date as of which such information is dated or certified and such information is not, or shall not be, as the case may be, incomplete by omitting to state any material fact necessary to make such information not misleading; provided that in the case of any projections hereafter so furnished by or on behalf of Revco, such projections shall represent the reasonable expectations of the management of Revco of future performance, based upon historical financial information and reasonable assumptions. SECTION 7.18. REFINANCING OF CERTAIN INDEBTEDNESS. This Agreement is, in part, a refinancing of Indebtedness of Revco under the Existing Credit Agreement. The Existing Credit Agreement was, in part, a refinancing of Indebtedness of Revco under the Revolving Credit Facility and Term Facility (as set forth in the definition of "Permitted Indebtedness" contained in the 9-1/8% Indenture). SECTION 7.19. REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. If the Amendment Effective Date is not the date of this Agreement, the representations and warranties of Revco and its Subsidiaries contained in this Article and 64 56 elsewhere in this Agreement, and all information contained in any Exhibit or Schedule or in any writing delivered by, or on behalf of, Revco or any of its Subsidiaries, will be true and correct on the Amendment Effective Date as though then made. ARTICLE VIII COVENANTS SECTION 8.01. AFFIRMATIVE COVENANTS. Revco agrees with the Administrative Agent, the Managing Agents and each Revolving Lender that, until all Revolving Credit Commitments have terminated and all Obligations have been paid and performed in full, Revco will perform the Obligations set forth in this Section 8.01. SECTION 8.02. FINANCIAL INFORMATION, ETC. Revco will furnish, or will cause to be furnished, to the Administrative Agent, each Revolving Lender and to each Managing Agent copies of the following financial statements, reports and information: (a) promptly when available and in any event within 100 days after the close of each Fiscal Year, (i) a consolidated balance sheet at the close of such Fiscal Year, and related consolidated statements of earnings, stockholders, equity and cash flow for such Fiscal Year, of Revco and its Subsidiaries, in each case with comparable information at the close of and for the prior Fiscal Year, audited without Impermissible Qualification by Arthur Andersen & Co. or another firm of independent, nationally recognized certified public accountants reasonably acceptable to the Required Lenders (with comparable information for such periods as set forth in the annual business plan most recently delivered pursuant to clause(e) below and for the corresponding prior Fiscal Year), (ii) a certificate from such accountants stating that they have reviewed the Compliance Certificate then being furnished pursuant to clause (a)(iii) below and to the effect that, in 65 57 making the examination necessary in connection with their audit of such annual financial statements, they have not become aware of any Default that has occurred and is continuing, or, if they have become aware of such Default, describing such Default and the steps, if any, being taken to cure it, and (iii) a Compliance Certificate calculated as of the close of such Fiscal Year; (b) promptly when available and in any event within 55 days after the close of each Fiscal Quarter (other than the last Fiscal Quarter of each Fiscal Year), (i) a consolidated balance sheet at the close of such Fiscal Quarter, and related consolidated statements of earnings, stockholders' equity and cash flow for such Fiscal Quarter and for the period commencing at the close of the previous Fiscal Year and ending with the close of such Fiscal Quarter (with comparable information for such periods as set forth in the annual business plan most recently delivered pursuant to clause (e) below and for the corresponding periods of the prior Fiscal Year) of Revco and its Subsidiaries, and (ii) a Compliance Certificate calculated as of the close of such Fiscal Quarter; (c) promptly following any filing thereof by Revco or any of its Subsidiaries with the Securities and Exchange Commission or with any securities exchange on which any of their respective securities are then listed, any annual, periodic or special report or registration statement generally available to the public; (d) not later than 90 days after the beginning of each Fiscal Year, Revco's budget for such Fiscal Year as approved by Revco's senior management which shall include: (i) the projected consolidated balance sheets, and related consolidated statements of 66 58 earnings, stockholders, equity and cash flow, of Revco and its Subsidiaries on a Fiscal Quarter basis, and (ii) a summary of key assumptions underlying all of the materials delivered pursuant to this clause, together with appropriate supporting details as requested by Required Lenders; (e) from time to time, as promptly as practicable after any officer of Revco has knowledge with respect thereto, a supplement or amendment to each Schedule, representation or warranty in this Agreement or any other Credit Document with respect to any matter hereafter arising which, if existing or occurring as of the Amendment Effective Date, would have been required to be set forth or described in such Schedule or as an exception to such representation or warranty or which is necessary to correct any information in such Schedule, representation or warranty which has been rendered inaccurate thereby; PROVIDED that unless such supplement or amendment is accepted in writing by the Required Lenders, in their sole and absolute discretion, no Schedule, representation or warranty will be deemed modified thereby and no Default will be deemed to have been avoided, cured or waived thereby; and (f) such other information (including a copy of each notice received by Revco or HSI, as the case may be, from the respective trustee under the 9-1/8% Indenture and the HSI Indenture) with respect to the financial condition of Revco or any Subsidiary as any Managing Agent or any Revolving Lender through the Administrative Agent may from time to time reasonably request, including reports, management letters and other detailed information (if any) prepared by any independent public accountants with respect to Revco in connection with any annual or interim audit made by such independent public accountants of the books of Revco or any of its Subsidiaries. 67 59 SECTION 8.03. MAINTENANCE OF EXISTENCES, ETC. Except as expressly permitted by Section 8.2.9 or 8.2.10, Revco will: (a) cause to be done at all times all things necessary to maintain and preserve the existences, rights (statutory and other) and franchises (including licenses, authorizations and permits necessary to the operation of its businesses) of Revco and its Subsidiaries; and (b) continue to own and hold, directly or indirectly and free and clear of all Liens, all of the outstanding shares of capital stock (excluding directors' qualifying shares, if any) or other equity of each of its Subsidiaries. SECTION 8.04. FOREIGN QUALIFICATION. Revco will, and will cause each of its Subsidiaries to, cause to be done at all times all things necessary to be duly qualified to do business and be in good standing as a foreign corporation in each jurisdiction where the failure so to qualify could have a Materially Adverse Effect. SECTION 8.05. PAYMENT OF TAXES, ETC. Revco will, and will cause each of its Subsidiaries to, pay and discharge, as the same may become due and payable, all Federal, state, local and foreign taxes, assessments, fees and other governmental charges or levies against it or on any of its property or the income or profits therefrom, as well as claims of any kind which, if unpaid, would become a Lien upon any of their respective properties and will pay (before they become delinquent) all such other tax obligations and liabilities; PROVIDED that the foregoing shall not require Revco or any such Subsidiary to pay or discharge any such tax, assessment, fee, charge, levy or Lien so long as it shall be diligently contesting the validity thereof in good faith by appropriate proceedings and shall have set aside on its books adequate reserves in accordance with GAAP with respect thereto. SECTION 8.06. INSURANCE. Revco will, and will cause each of its Subsidiaries to, at its sole cost and expense maintain with responsible insurance companies insurance, including self-insurance, in such amounts as is customary in the case of similar businesses, with respect to its properties and business against such casualties and 68 60 contingencies and of such types and in such amounts as is customary in the case of similar businesses from time to time and, in any event, as required by any Applicable Law and will, within 100 days after the end of each Fiscal Year, furnish to the Administrative Agent, the Managing Agents and each Revolving Lender a certificate of an Authorized Officer of Revco setting forth the nature and extent of all insurance maintained by Revco and its Subsidiaries in accordance with this Section 8.06. SECTION 8.07. NOTICE OF DEFAULT, LITIGATION, ETC. Revco will give prompt notice (with a description in reasonable detail of the nature and period of existence thereof and of the actions which Revco has taken and proposes to take with respect thereto) to the Administrative Agent and the Managing Agents of: (a) the occurrence of any Default; (b) any litigation, arbitration or governmental investigation or proceeding not previously disclosed by Revco to the Revolving Lenders which has been instituted or, to the knowledge of Revco, is threatened against, Revco or any of its Subsidiaries or to which any of its properties, assets or revenues is subject which (i) if adversely determined, could have a Materially Adverse Effect, or (ii) relates to this Agreement or any other Credit Document; (c) the occurrence of any other circumstance which has resulted or could result in a Materially Adverse Effect; (d) any material adverse development which shall occur in any litigation, arbitration or governmental investigation or proceeding against (or, to the knowledge of Revco, affecting) Revco, any of its Subsidiaries or any of their respective assets previously disclosed by Revco to the Revolving Lenders; (e) the institution of any steps by Revco, any member of its Controlled Group or any other Person to terminate any Pension Plan, or the failure to make a 69 61 required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under section 302(f) of ERISA, or the taking of any action with respect to a Pension Plan which could result in the requirement that Revco or any member of its Controlled Group furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan which could have a Materially Adverse Effect or any increase in the contingent liability of Revco or any member of its Controlled Group with respect to any post-retirement Welfare Plan benefit which could result in a Materially Adverse Effect; and (f) any assessment of withdrawal liability against Revco or any member of its Controlled Group by any Multiemployer Plan in an amount which could result in a Materially Adverse Effect. SECTION 8.08. PERFORMANCE OF OBLIGATIONS. Revco will, and will cause each of its Subsidiaries to, (a) perform promptly and faithfully all of its Obligations under each Credit Document executed by it; and (b) comply with the provisions of all contracts or agreements to which it is a party or by which it is bound, whether oral or written, express or implied, and pay all obligations which it has incurred or may incur pursuant to any such contract or agreement as such obligations become due, where the failure so to comply or make such payment, individually or in the aggregate with all such other failures, has or could have a Materially Adverse Effect. SECTION 8.09. BOOKS AND RECORDS. Revco will, and will cause each of its Subsidiaries to, keep proper books and records reflecting all of its business affairs and transactions (including all loans and advances by Revco to any of its Subsidiaries) in accordance with GAAP and permit the Administrative Agent, the Managing Agents and the Revolving Lenders, on reasonable notice and at reasonable times and intervals during ordinary business hours, to visit all of its offices, discuss its financial matters with officers of Revco or any of its Subsidiaries and its independent public accountants (provided that each Revolving 70 62 Lender shall give Revco prior notice of any meeting with such independent public accountants and permit a representative of Revco to be present at such meeting), and examine and make abstracts from any of its books or other corporate records. Revco shall pay any fees of such independent public accountants incurred in connection with the exercise by the Administrative Agent, the Managing Agents and the Revolving Lenders of their rights pursuant to this Section 8.09. Revco will, and will cause each of its Subsidiaries to, continue in full force and effect all of its respective inventory control procedures in effect on the date of this Agreement, except for improvements thereto. SECTION 8.10. COMPLIANCE WITH LAWS, ETC. Revco will, and will cause each of its Subsidiaries to, comply with the requirements of all Applicable Laws noncompliance with which could have a Materially Adverse Effect. SECTION 8.11. ENVIRONMENTAL MATTERS. Revco will, and will cause each of its Subsidiaries to: (a) use and operate all of its facilities and properties in material compliance with all Environmental Laws, keep all necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in material compliance therewith, and handle all Hazardous Materials in material compliance with all applicable Environmental Laws; (b) immediately notify the Administrative Agent and the Managing Agents and provide copies upon receipt of all written claims, complaints, notices or inquiries relating to the condition of its facilities and properties or compliance with Environmental Laws, and shall promptly cure and have dismissed with prejudice to the satisfaction of the Required Lenders any actions and proceedings relating to compliance with Environmental Laws; and (c) provide such information and certifications which the Administrative Agent may reasonably request from time to time to evidence compliance with this Section 8.1.10. SECTION 8.12. MAINTENANCE OF PROPERTY. Revco will, and will cause each of its Subsidiaries to, at their 71 63 joint and several expense maintain and keep its properties which are used or useful to its business in good repair, working order and condition, and from time to time make all necessary or desirable repairs renewals and replacements, in a manner consistent with its existing practices, so that its businesses may be properly and advantageously conducted at all times. SECTION 8.13. NEGATIVE COVENANTS. Revco agrees with the Administrative Agent, the Managing Agents and each Revolving Lender that, until all Revolving Credit Commitments have terminated and all Obligations have been paid and performed in full, Revco will perform the obligations set forth in this Section 8.13. SECTION 8.14. BUSINESS ACTIVITIES. Revco will not, nor will it permIt any of its Subsidiaries to, engage in any business activity other than the ownership and operation of retail drugstores and such other businesses as may be incidental or related thereto or as engaged in by Revco and its Subsidiaries on the Amendment Effective Date. SECTION 8.15. INDEBTEDNESS. Revco will not, nor will it permit any of its Subsidiaries to, create, incur, assume or suffer to exist or otherwise become or be liable in respect of any Indebtedness other than: (a) Indebtedness in respect of the Loans, the Letters of Credit and other Obligations; (b) Indebtedness outstanding on the date hereof and identified in Item 8.2.2(b) ("Existing Indebtedness") of the Disclosure Schedule and any refinancing, renewal or extension of such Indebtedness, in an amount not greater than the amount required to repay the Indebtedness so refinanced and which does not accelerate the date or increase the amount of any required repayment, repurchase or redemption of (or impose any significantly greater obligation on Revco or any of its Subsidiaries than the obligations imposed by) the Indebtedness being refinanced, renewed or extended; (c) Permitted Additional Indebtedness of Revco and, with respect to Acquired Indebtedness, the respective acquired Subsidiary; 72 64 (d) Indebtedness of Revco and, with respect to Acquired Indebtedness, the respective acquired Subsidiary, in connection with interest rate agreements entered in the ordinary course of business to hedge the interest rate obligations of Revco and its Subsidiaries; (e) unsecured Indebtedness of Revco and its Subsidiaries incurred in the ordinary course of business (including open accounts extended by suppliers on normal trade terms) in connection with purchases of goods and services but excluding Indebtedness for borrowed money or Contingent Liabilities in respect of such Indebtedness; PROVIDED that only Revco and Subsidiaries held for disposition may incur such Indebtedness with respect to purchases of inventory; (f) Indebtedness of any Subsidiary of Revco to Revco in connection with loans or advances made by Revco to such Subsidiary; (g) Indebtedness in respect of taxes, assessments or governmental charges to the extent that payment thereof shall not at the time be required to be made in accordance with the provisions of Section 8.05. or which is being contested in good faith by diligent proceedings, for which adequate reserves in accordance with GAAP shall have been set aside and with respect to which no Lien has attached; and (h) Indebtedness in respect of judgments or awards which have been in force for less than the applicable appeal period so long as execution is not levied thereunder (or in respect of which Revco or any Subsidiary shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review). SECTION 8.16. LIENS. Revco will not, nor will it permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except the following ("Permitted Liens"): (a) Liens encumbering the assets of Revco or any of its Subsidiaries which were granted and in effect 73 65 prior to the date hereof to secure Indebtedness which is permitted by Section 8.15(b) and which Liens are described in the comment made with respect to such Indebtedness in Item 8.15(b) ("Existing Indebtedness") of the Disclosure Schedule; (b) Liens granted to secure Indebtedness (x) incurred to finance the purchase or other acquisition of assets permitted by Section 8.21 on (but only on) such assets and where such Indebtedness does not exceed the consideration paid to purchase or acquire such assets or (y) assumed by Revco in connection with a purchase or other acquisition permitted by Section 8.21. and where such Lien was not granted in anticipation or contemplation of such purchase or other acquisition or (z) permitted by Section 8.15(c) incurred for the purpose of financing the acquisition, construction and/or improvement of fixed assets provided that such Lien attaches solely to such property and the principal amount of such Indebtedness does not exceed 100% of the cost of such acquisition, construction and/or improvement and in each case where, when added to all other Indebtedness so secured, such Indebtedness does not exceed (i) $50,000,000 in the aggregate for Indebtedness secured by assets other than specific fixed assets and (ii) $100,000,000 in the aggregate for all Indebtedness secured pursuant to this CLAUSE (B); (c) Liens securing any refinancing, renewal or extension of any Indebtedness permitted by Section 8.2.2(b); provided that any such Lien is limited to the property and assets securing the Indebtedness being refinanced, renewed or extended; (d) Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been SET aside on its books; (e) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not overdue or being contested in good faith by appropriate proceedings and 74 66 for which adequate reserves in accordance with GAAP shall have been set aside on its books; (f) Liens incurred in the ordinary course of business in connection with worker's compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory obligations, leases and contracts (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds; (g) judgment Liens in existence less than 10 days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full (subject to a customary deductible) by insurance, so long as the aggregate amount of all such judgment Liens at any time does not exceed $20,000,000; (h) leases or subleases to other Persons by Revco or any of its Subsidiaries entered into in the ordinary course of business and not interfering in any material respect with the ordinary conduct of the business of Revco or such Subsidiary; PROVIDED that in no event shall more than 30% of the floor space of any store (other than any store at which Revco or such Subsidiary has ceased doing business) be leased or subleased; (i) any interest or title of a lessor under any lease not prohibited hereunder; and (j) easements, restrictions, conditions, zoning restrictions, rights-of-way, licenses and other similar charges and encumbrances and other minor defects or irregularities of title which are not, in the aggregate, material. SECTION 8.17. FINANCIAL CONDITION. Revco will not: (a) Consolidate Interest and Lease Expense Coverage Ratio. Permit the Consolidated Interest and Lease Expense Coverage Ratio as of the last day of each Fiscal Quarter (the "Measurement Date") on a rolling thirteen Fiscal Month basis to be less than (i) for each Fiscal Quarter ending in Fiscal Year 1996, 1.2 to 1.0 and (ii) for each Fiscal 75 67 Quarter for Fiscal Year 1997 and each Fiscal Year thereafter, 1.3 to 1.0. (b) Consolidated Total Indebtedness/Adjusted EBITDA Ratio. Permit the Consolidated Total Indebtedness/Adjusted EBITDA Ratio as of the last day of each Fiscal Quarter to exceed (i) for each Fiscal Quarter ending in Fiscal Year 1996 and Fiscal Year 1997, 3.75 to 1.00, (ii) for each Fiscal Quarter ending in Fiscal Year 1998, 3.5 to 1.00 and (iii) for each Fiscal Quarter ending in Fiscal Year 1999 and each Fiscal Year thereafter, 3.25 to 1.00. SECTION 8.18. INVESTMENTS. Revco will not, nor will it permit any of its Subsidiaries to, make, incur, assume or suffer to exist any Investment in any other Person, except: (a) Investments in any Person existing on the date hereof and identified in Item 8.2.5(a) ("Ongoing Investments") of the Disclosure Schedule; (b) Cash Equivalent Investments; (c) without duplication, Investments permitted as Indebtedness pursuant to Section 8.15.; (d) without duplication, Investments in the form of Capital Expenditures in the ordinary course of business; (e) acquisitions permitted by Section 8.21.; (f) Investments by Revco in any of its Subsidiaries, or by any of its Subsidiaries in any of its other Subsidiaries in the form of contributions to capital or equity securities of any of such Subsidiaries; and (g) other Investments in an aggregate amount at any time not to exceed $10,000,000; PROVIDED that no Investment otherwise permitted by clauses (c) through (g) above shall be permitted to be made if, immediately before or after giving effect thereto, any Default shall have occurred and be continuing. 76 68 SECTION 8.19. RESTRICTED PAYMENTS, ETC. On and at all times after the Amendment Effective Date: (a) Revco will not declare, pay or make any dividend or distribution (in cash, property or obligations) on any shares of any class of capital stock (now or hereafter outstanding) of Revco or on any warrants, options or other rights with respect to any shares of any class of capital stock (now or hereafter outstanding) of Revco (other than dividends or distributions payable in its common stock or warrants to purchase its common stock or splitups or reclassifications of its stock into additional or other shares of its common stock) or apply, or permit any of its Subsidiaries to apply, any of its funds, property or assets to the purchase, redemption, sinking fund or other retirement of, or agree (or permit any of its Subsidiaries to agree) to purchase or redeem, any shares of any class of capital stock (now or hereafter outstanding) of Revco, or warrants, options or other rights with respect to any shares of any class of capital stock (now or hereafter outstanding) of Revco; and (b) Revco will not, and will not permit any Subsidiary to, make any deposit for any of the foregoing purposes; each of the foregoing being a "restricted payment", unless immediately after giving effect to such restricted payment: (c) no Default shall have occurred and be continuing; and (d) the amount of such restricted payment, when added total other restricted payments on or after June 3, 1995, shall not exceed $100,000,000 plus Available Consolidated Net Income. SECTION 8.20. TAKE OR PAY CONTRACTS. Revco will not, nor will it permit any of its Subsidiaries to, enter into or be a party to any arrangement for the purchase of materials, supplies, other property or services if such arrangement by its express terms requires that payment be made by Revco or such Subsidiary regardless of whether or not such materials, supplies, other properties or services are delivered or furnished to it, except severance payment 77 69 obligations under employment contracts and any other plan, arrangement or program (whether or not subject to ERISA) in an aggregate amount for Revco and all of its Subsidiaries not in excess of $40,000,000 at any time. SECTION 8.21. CONSOLIDATION, MERGER, ACQUISITIONS, ETC. Revco will not, nor will it permit any of its Subsidiaries to, liquidate or dissolve, consolidate with, effect a recapitalization or reorganization, or merge into or with, any other Person, or purchase or otherwise acquire all or substantially all of the assets of any Person (or of any division thereof) except (a) any such Subsidiary may liquidate or dissolve voluntarily into Revco or any other such Subsidiary and any such Subsidiary may merge with and into Revco or any other such Subsidiary; and (b) any Permitted Material Acquisition; (c) any purchase or other acquisition by Revco or any of its Subsidiaries (by merger consolidation or otherwise) of all or substantially all of the equity securities of a corporation or all or substantially all of the assets of any Person engaged in a business permitted to be engaged in by Revco or such Subsidiary pursuant to Section 8.14 which is not a Material Acquisition; provided further that, in any such case, if Revco is a party thereto, Revco is the surviving entity. SECTION 8.22. ASSET DISPOSITIONS, ETC. Revco will not, nor will it permit any of its Subsidiaries to, sell, transfer, lease or otherwise dispose of, or grant options, warrants or other rights with respect to, all or substantially all of the assets of Revco and its Subsidiaries, taken as a whole (including accounts receivable and capital stock or other equity of Subsidiaries) to any Person. SECTION 8.23. MODIFICATION OF CERTAIN INSTRUMENTS, ORGANIC DOCUMENTS, ETC. Revco will not, nor will it permit any of its Subsidiaries to: (a) consent to any amendment, supplement or other modification of any of the terms or provisions 78 70 contained in, or applicable to, or to any refinancing or renewal of, the 9-1/8% Notes or HSI Notes or any Indebtedness evidencing any refinancing or renewal of the 9-1/8% Notes or HSI Notes (including, with respect to the 9-1/8% Indenture and HSI Indenture or any other Instruments evidencing or governing the 9-1/8% Notes or HSI Indenture or any such Indebtedness, any provision in respect of acceleration, covenant, default, subordination, sinking fund, repayment, required repurchase, interest rate or redemption), other than any amendment, supplement or other modification, or any refinancing or renewal, which extends the date or reduces the amount of any required repayment, repurchase or redemption or which, in the opinion of the Required Lenders, otherwise has no adverse effect on the Revolving Lenders; (b) prepay, repurchase, defease, redeem or otherwise acquire or retire for value (collectively, "Retire") any 9-1/8% Notes or HSI Notes or any Indebtedness evidencing any refinancing or renewal of the 9-1/8% Notes or HSI Notes (other than in connection with a refinancing or renewal of the entire amount of the 9-1/8% Notes or HSI Notes or such Indebtedness which satisfies the requirement of clause (a) above); provided that, unless a Default shall exist or would result therefrom, Revco may Retire 9-1/8% Notes and Revco or HSI may Retire HSI Notes in an aggregate principal amount of up to $150,000,000; or (c) consent to any amendment, supplement or other modification of any of the terms or provisions contained in any of Revco's or any of its Subsidiaries' Organic Documents which is in any manner adverse to the interests of the Revolving Lenders. SECTION 8.24. TRANSACTIONS WITH AFFILIATES. Except as set forth in Item 8.2.11 ("Affiliate Transactions") of the Disclosure Schedule, Revco will not, nor will it permit any of its Subsidiaries to, enter into, or cause, suffer or permit to exist any arrangement or contract with any of its Affiliates (other than Revco or the Obligors) unless such arrangement is fair and equitable to Revco or such Subsidiary and is not of a sort which would not be entered into by a prudent Person in the position of Revco or such Subsidiary with, or which is on terms which are less favorable to Revco or such Subsidiary than are 79 71 obtainable from, any Person which is not one of its Affiliates. SECTION 8.25. INCONSISTENT AGREEMENTS. Revco will not, nor will it permit any of its Subsidiaries to, enter into any agreement containing any provision which would be violated or breached by any Credit Extension or by the performance by Revco or any other Obligor of its Obligations hereunder or under any Credit Document. SECTION 8.26. ENVIRONMENTAL MATTERS. Revco will not, nor will it permit any of its Subsidiaries to, violate any Environmental Law if such violation could have a Materially Adverse Effect and, without limiting the foregoing, Revco will not, and will not permit any Person to, except in accordance with Applicable Law, dispose of any Hazardous Material into, onto or from any real property owned or operated by Revco or any of its Subsidiaries, nor allow any Lien imposed pursuant to any law, regulation or order relating to Hazardous Materials or the disposal thereof to remain on such real property. SECTION 8.27. LIMITATION ON NEGATIVE PLEDGES, ETC. From and after the Amendment Effective Date, Revco will not, nor will it permit any of its Subsidiaries to, enter into any agreement containing any provision which would be violated or breached by a pledge of the outstanding capital stock of the Subsidiaries or a guarantee by such Subsidiaries of Revco's Obligations hereunder, except to the extent that any provision in Acquired Indebtedness of any Subsidiary acquired by Revco or any of its Subsidiaries after the Amendment Effective Date prohibits or limits the ability of such acquired Subsidiary or its stockholders to enter into a pledge of stock or a guaranty of Revco's Obligations; provided that such Indebtedness, prohibitions or limitations were not created or entered into in anticipation or contemplation of or in connection with the acquisition of such Subsidiary. ARTICLE IX EVENTS OF DEFAULT ----------------- SECTION 9.01. EVENTS OF DEFAULT. The term "Event of Default" shall mean any of the events set forth in this Section 9.01. 80 72 SECTION 9.02. NONPAYMENT OF OBLIGATIONS. Revco shall default: (a) in the payment or prepayment when due (whether at stated maturity or by acceleration, mandatory prepayment or otherwise) of any principal of any Loan or any Reimbursement Obligation; or (b) in the payment when due of any interest on any Loan or any Reimbursement Obligation or of any commitment fee, letter of credit fee or any other monetary Obligation (other than principal of any Loan or Reimbursement Obligation) and such default shall continue unremedied for a period of 5 Business Days. SECTION 9.03. NONPERFORMANCE OF CERTAIN COVENANTS. Revco shall default in the due performance or observance of any of its obligations under Section 8.02. SECTION 9.04. NONPERFORMANCE OF OTHER OBLIGATIONS. Revco shall default in the due performance and observance of any other agreement contained herein or in any other Credit Document executed by it, and such default shall continue unremedied for a period of 30 days after the earlier of notice thereof shall have been given to Revco by the Administrative Agent or the date on which an Authorized Officer of Revco knew or should have known of such default. SECTION 9.05. BANKRUPTCY, INSOLVENCY, ETC. Revco or any of its Subsidiaries shall: (a) become insolvent or generally fail to pay, or admit in writing its inability to pay, debts as they become due; (b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for Revco or any such Subsidiary or any property of any thereof, or make a general assignment for the benefit of creditors; (c) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for Revco or any such Subsidiary or for a substantial part of the property of any thereof, and such trustee, 81 73 receiver, sequestrator or other custodian shall not be discharged within 60 days; (d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of Revco or any such Subsidiary, and, if such case or proceeding is not commenced by Revco or such Subsidiary, such case or proceeding shall be consented to or acquiesced in by Revco or such Subsidiary or shall result in the entry of an order for relief or shall remain for 60 days undismissed; or (e) take any corporate action authorizing, or in furtherance of, any of the foregoing. SECTION 9.06. BREACH OF WARRANTY. Any representation or warranty of Revco hereunder or in the Credit Documents or any representation or warranty by any Obligor in any Credit Document or any other writing furnished by or on behalf of Revco or any Obligor to any Agent or any Revolving Lender for the purposes of or in connection with this Agreement or any such Credit Document is or shall be incorrect when made or deemed made in any material respect. SECTION 9.07. DEFAULT ON OTHER INDEBTEDNESS, ETC. Any other Indebtedness of Revco or any of its Subsidiaries in an outstanding principal amount of $10,000,000 or more shall become due and payable and not be paid or satisfied in full, or its holder shall be entitled to require Revco or such Subsidiary to purchase, repurchase, redeem, defease, retire or otherwise prepay such Indebtedness in whole or in part except as permitted by Section 8.2.10(b) (in each case without giving effect to any grace periods applicable thereto); or any default shall occur under the terms applicable to any Indebtedness in an outstanding principal amount of $10,000,000 or more of Revco or any of its Subsidiaries representing any borrowing or financing or arising under any other material agreement, and such default shall: (a) consist of the failure to pay such Indebtedness at the maturity thereof; 82 74 (b) result in the acceleration of such Indebtedness, or continue unremedied for a period of time sufficient to permit the acceleration of such Indebtedness or to permit the holder thereof to require Revco or such Subsidiary to purchase, redeem or defease such Indebtedness in whole or in part; or (c) without limiting clause (b) above, continue unremedied (and not have been waived by the holder of such Indebtedness) for more than 10 days. SECTION 9.08. INVALIDITY OF HSI GUARANTY. The HSI Guaranty shall cease to be in full force and effect with respect to HSI other than as expressly permitted hereunder, HSI shall fail (subject to any applicable grace period) to comply with or to perform any applicable provision of the HSI Guaranty, or HSI (or any Person by, through or on behalf of-HSI), shall contest in any manner the validity, binding nature or enforceability of the HSI Guaranty with respect to HSI. SECTION 9.09. PENSION PLANS. Any of the following events shall occur with respect to any Pension Plan: (a) the institution of any steps by Revco, any member of its Controlled Group or any other Person to terminate a Pension Plan if, as a result of such termination, Revco or any such member could be required to make a contribution to such Pension Plan, or could incur a liability or obligation to such Pension Plan, in excess of $10,000,000; (b) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under section 302(f) of ERISA; (c) the institution of any steps or failure to take any action by Revco, any member of its Controlled Group or any other Person if such act or omission results, or could reasonably be expected to result, in the assessment of withdrawal liability by a Multiemployer Plan against Revco or any member of its Controlled Group in an amount in excess of $10,000,000; or 83 75 (d) a "default" (as defined in section 4219(c)(5) of ERISA) occurs with respect to payments owed by Revco or any member of its Controlled Group to any Multiemployer Plan. SECTION 9.10. JUDGMENTS. Any judgment or order for the payment of money in an aggregate amount in excess of $20,000,000 shall be rendered against Revco or any of its Subsidiaries and either: (a) enforcement proceedings shall have been commenced by any creditor upon such judgment or order; or (b) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect. SECTION 9.11. CHANGE IN CONTROL. Any Change in Control shall occur. SECTION 9.12. ACTION IF BANKRUPTCY. If any Event of Default described in clauses (a) through (d) of Section 9.05. shall occur, then all Revolving Credit Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other Obligations shall automatically be and become immediately due and payable, without notice or demand. SECTION 9.13. ACTION IF OTHER EVENT OF DEFAULT. Subject to Section 5.06, if any Event of Default (other than any Event of Default described in clauses (a) through (d) of Section 9.05.) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Administrative Agent may, and upon the direction of the Required Lenders, shall, upon notice or demand, declare a Commitment Termination Event, declare the outstanding principal amount of the Loans and all other Obligations to be due and payable and terminate all Revolving Credit Commitments, whereupon the full unpaid amount of such Loans and any and all other Obligations shall be and become immediately due and payable, without further notice, demand, or presentment, and/or, as the case may be, the Revolving Credit Commitments shall terminate. 84 76 ARTICLE X THE AGENTS ---------- SECTION 10.01. APPOINTMENT AND AUTHORIZATION; "AGENT". Each Revolving Lender hereby irrevocably (subject to Section 10.09) appoints, designates and authorizes each Agent to take such action on its behalf under the provisions of this Agreement and each other Credit Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Credit Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Credit Document, the Agents shall not have any duties or responsibilities, except those expressly set forth herein, nor shall any Agent have or be deemed to have any fiduciary relationship with any Revolving Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Credit Document or otherwise exist against any Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" in this Agreement with reference to any Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. SECTION 10.02. DELEGATION OF DUTIES. Each Agent may execute any of its duties under this Agreement or any other Credit Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. No Agent shall be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. SECTION 10.03. LIABILITY OF AGENTS. None of the Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Credit Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Revolving Lenders 85 77 for any recital, statement, representation or warranty made by Revco or any Subsidiary or Affiliate of Revco, or any officer thereof, contained in this Agreement or in any other Credit Document, or in any certificate, report, statement or other document referred to or provided for in, or received by any Agent under or in connection with, this Agreement or any other Credit Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Credit Document, or for any failure of Revco or any other party to any Credit Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Revolving Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Credit Document, or to inspect the properties, books or records of Revco or any of Revco's Subsidiaries or Affiliates. SECTION 10.04. RELIANCE BY AGENTS. (a) Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to Revco), independent accountants and other experts selected by such Agent. Each Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Credit Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Revolving Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agents shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Credit Document in accordance with a request or consent of the Required Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Revolving Lenders. (b) For purposes of determining compliance with the conditions specified in Section 6.01, each Revolving Lender that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied 86 78 with, each document or other matter either sent by an Agent to such Revolving Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Revolving Lender. SECTION 10.05. NOTICE OF DEFAULT. The Agents shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except, in the case of the Administrative Agent, with respect to defaults in the payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Revolving Lenders, or if the Administrative Agent shall have received written notice from a Revolving Lender or Revco referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". The Administrative Agent will notify the Revolving Lenders of its receipt of any such notice. The Agent shall take such action with respect to such Default or Event of Default as may be requested by the Required Lenders in accordance with Article IX; provided, however, that unless and until the Administrative Agent has received any such request, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Revolving Lenders. SECTION 10.06. CREDIT DECISION. Each Revolving Lender acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by the Agents hereinafter taken, including any review of the affairs of Revco and its Subsidiaries, shall be deemed to constitute any representation or warranty by any AgentRelated Person to any Revolving Lender. Each Revolving Lender represents to the Agents that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property financial and other condition and creditworthiness of Revco and its Subsidiaries, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to Revco and its Subsidiaries hereunder. Each Revolving Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based 87 79 on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Credit Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of Revco. Except for notices, reports and other documents expressly herein required to be furnished to the Revolving Lenders by the Administrative Agent, the Agents shall not have any duty or responsibility to provide any Revolving Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of Revco which may come into the possession of any of the Agent-Related Persons. SECTION 10.07. INDEMNIFICATION OF AGENT. Whether or not the transactions contemplated hereby are consummated, the Revolving Lenders shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of Revco and without limiting the obligation of Revco to do so), pro rata, from and against any and all Indemnified Liabilities; PROVIDED, HOWEVER, that no Revolving Lender shall be liable for the payment to the Agent-Related Persons of any portion of such Indemnified Liabilities resulting solely from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Revolving Lender shall reimburse each Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by such Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Credit Document, or any document contemplated by or referred to herein, to the extent that such Agent is not reimbursed for such expenses by or on behalf of Revco. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of any Agent. SECTION 10.08. AGENT IN INDIVIDUAL CAPACITY. BofA and its Affiliates and Paribas and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with Revco and its 88 80 Subsidiaries and Affiliates as though BofA or Paribas were not an Agent hereunder and without notice to or consent of the Revolving Lenders. The Revolving Lenders acknowledge that, pursuant to such activities, BofA or its Affiliates or Paribas or its Affiliates may receive information regarding Revco or its Affiliates (including information that may be subject to confidentiality obligations in favor of Revco or such Subsidiary) and acknowledge that such Agent shall be under no obligation to provide such information to them. With respect to its Loans, each of BAI, Paribas and each of their respective Affiliates shall have the same rights and powers under this Agreement as any other Revolving Lender and may exercise the same as though it were not the Agent, and the terms "Revolving Lender" and "Revolving Lenders" include each of BAI and Paribas in its individual capacity. SECTION 10.09. SUCCESSOR AGENT. The Administrative Agent may resign as Administrative Agent at any time upon at least 10 Business Days' prior notice to Revco and all Revolving Lenders. If the Administrative Agent resigns under this Agreement, the Required Lenders (with the written consent of Revco at all times other than during the existence of an Event of Default, which consent shall not be unreasonably withheld) shall appoint from among the Revolving Lenders the successor Administrative Agent for the Revolving Lenders. If no successor agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Revolving Lenders and Revco, a successor agent from among the Revolving Lenders. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term "Administrative Agent" shall mean such successor agent and the retiring Administrative Agent's appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Article X and Sections 11.03 and 11.04 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement. If no successor agent has accepted appointment as Administrative Agent by the date which is 20 Business Days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Revolving Lenders shall perform all of the duties of the 89 81 Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. SECTION 10.10. MANAGING AGENTS. None of the Revolving Lenders identified on the facing page or signature pages of this Agreement as a "Managing Agent" shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Revolving Lenders as such or as a Swing Line Lender. Without limiting the foregoing, none of the Revolving Lenders so identified as a "Managing Agent" shall have or be deemed to have any fiduciary relationship with any Revolving Lender. Each Revolving Lender acknowledges that it has not relied, and will not rely, on any of the Revolving Lenders so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. ARTICLE XI MISCELLANEOUS ------------- SECTION 11.01. WAIVERS, AMENDMENTS, ETC. The provisions of this Agreement and of each Credit Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by Revco and the Required Lenders and acknowledged by the Administrative Agent (it being understood that the Administrative Agent has no independent vote), provided that no such amendment, modification or waiver: (a) which would modify any requirement hereunder that any particular action be taken by all the Revolving Lenders or by the Required Lenders shall be effective unless consented to by each Revolving Lender; (b) which would modify this Section 11.1, change the definition of "Required Lenders" or "Voting Percentage", increase any Total Revolving Credit Commitment Amount or change any Revolving Percentage or Voting Percentage for any Revolving Lender, reduce any fees described in Article II, extend the Revolving Credit Commitment Termination Date or subject any Revolving Lender to any additional obligations shall be made without the consent of each Revolving Lender; 90 82 (c) which would extend any mandatory Revolving Credit Commitment reduction date or reduce the amount of any mandatory Revolving Credit Commitment reduction or extend the due date for, or reduce the amount of any payment of principal, interest or fees on any Loan shall be made without the consent of each Revolving Lender; (d) which would affect adversely the interests, rights or obligations of the Administrative Agent and the Administrative Agent shall be made without the consent of the Administrative Agent; (e) which would affect adversely the interests, rights or obligations of the Bid Loan Agent and the Bid Loan Agent shall be made without the consent of the Bid Loan Agent; or (f) which would release HSI under the HSI Guaranty, shall be made without the consent of each Revolving Lender, and, PROVIDED FURTHER, that the Fee Letter may be amended or rights or privileges thereunder waived in a writing executed by the parties thereto. No failure or delay on the part of any Agent or any Revolving Lender in exercising any power or right under this Agreement or any other Credit Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on Revco in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by any Agent or any Revolving Lender under this Agreement or any other Credit Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. SECTION 11.02. NOTICES. (a) All notices, requests and other communications shall be in writing (including, unless the context expressly otherwise provides, by facsimile transmission, provided that any matter transmitted by Revco by facsimile shall be immediately 91 83 confirmed by a telephone call to the recipient at the number set forth below its signature hereto), and mailed, faxed or delivered, to the address or facsimile number specified for notices set forth below its signature hereto; or, as directed to Revco or the Administrative Agent, to such other address as shall be designated by such party in a written notice to the other parties, and as directed to any other party, at such other address as shall be designated by such party in a written notice to Revco and the Administrative Agent. (b) All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail, or if delivered, upon delivery; except that notices pursuant to Article II or X shall not be effective until actually received by the Administrative Agent. (c) Any agreement of the Agents, the Issuing Banks and the Revolving Lenders herein to receive certain notices by telephone, facsimile or electronic transmission is solely for the convenience and at the request of Revco. The Agents, the Issuing Banks and the Revolving Lenders shall be entitled to rely on the authority of any Person purporting to be a Person authorized by Revco to give such notice and the Agents and the Revolving Lenders shall not have any liability to Revco or any other Person on account of any action taken or not taken by the Agents, the Issuing Banks or the Revolving Lenders in reliance upon such telephonic, facsimile or electronic transmission notice. The obligation of Revco to repay the Loans shall not be affected in any way or to any extent by any failure by the Agents and the Revolving Lenders to receive written confirmation of any telephonic or facsimile notice or the receipt by the Agents and the Revolving Lenders of a confirmation which is at variance with the terms understood by the Agents and the Revolving Lenders to be contained in the telephonic or facsimile notice. SECTION 11.03. FEES AND EXPENSES. Revco shall pay, upon receipt of an itemized invoice therefor in reasonable detail, on demand all expenses of each Managing Agent and the Administrative Agent in connection with its review and examination of Revco and its Subsidiaries for 92 84 purposes of the transactions contemplated hereby, in connection with the development, preparation, delivery, execution, closing and ongoing administration of the Credit Documents (including the reasonable fees and expenses of Mayer, Brown & Platt or other counsel (and allocated costs and disbursements of internal counsel) to the Managing Agents and the Administrative Agent (and of local counsel, if any, who may be retained by counsel to the Managing Agents) and all travel and lodging expenses, fees and expenses of consultants, field examiners and other experts, environmental analysis fees, and printing, document production, delivery and communication costs in connection with the Credit Documents and the transactions contemplated thereby). If, at any time or times, regardless of the existence of an Event of Default, any Managing Agent or the Administrative Agent (or, in the case of clause (b) or (c) below, any Revolving Lender) shall employ counsel, consultants, field examiners or other professional advisors for advice or other representation or shall incur reasonable legal, appraisal, accounting, consulting or other costs and expenses (including reasonable loan administration expenses) in connection with: (a) any amendment, supplement, modification or waiver of, or consent with respect to, any of the Credit Documents (including any "workout" or other restructuring or resetting of any or all of the Obligations); (b) any litigation, contest, dispute, suit, proceeding or action (whether instituted by any Agent or any Revolving Lender, Revco or any other Person) in any way relating to, any of the Credit Documents, or any other agreements to be executed or delivered in connection therewith or herewith, including any litigation, contest, dispute, suit, case, proceeding or action, and any appeal or review thereof, in connection with a case commenced by or against Revco or any other Person that may be obligated to any Agent or any Revolving Lender by virtue of the Credit Documents, under the Bankruptcy Code or any other applicable Federal, state, or foreign bankruptcy or other similar law; or (c) any attempt to enforce any rights of any Agent or any Revolving Lender against Revco or any other Person that may be obligated to any Agent or any 93 85 Revolving Lender by virtue of any of the Credit Documents; then, and in any such event, the reasonable fees of such attorneys, consultants, field examiners and other professional advisors arising from such services, including those of any appellate proceedings, and all reasonable expenses, costs, charges and other fees incurred by such counsel or other professionals in any way or respect arising in connection with or relating to any of the events or actions described in this Section, together with all other out-of-pocket expenses of any Agent or such Revolving Lender in connection with any of the foregoing events, shall, upon receipt by Revco of an itemized invoice therefor in reasonable detail, be payable on demand by Revco to such Agent or such Revolving Lender and shall be additional Obligations secured under the Credit Documents. Without limiting the generality of the foregoing, such reasonable expenses, costs, charges and fees may include: paralegal fees, costs and expenses; accountants' fees, costs and expenses; environmental analysis fees, costs and expenses; appraisers' fees, costs and expenses; management, employee benefit, liquidator and other consultants' fees, costs and expenses; court costs and expenses; photocopying and duplicating expenses; court reporter fees, costs and expenses; long distance telephone charges; air express charges; secretarial overtime charges; and expenses for travel, lodging and food paid or incurred in connection with the performance of such legal or other professional services. SECTION 11.04. INDEMNIFICATION. In consideration of the execution and delivery of this Agreement by each Revolving Lender and the extension of the Revolving Credit Commitment, Revco hereby indemnities, exonerates and holds each Agent, and each Revolving Lender and each of their respective officers, directors, employees, attorneys and agents (the "Indemnified Parties") free and harmless from and against any and all actions, causes of action, suits, losses, costs, liabilities and damages, and expenses actually incurred in connection therewith (irrespective of whether such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to: 94 86 (a) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Loan; (b) the entering into and performance by Revco or any other Obligor of this Agreement and any other Credit Document; (c) any investigation, litigation, or proceeding related to any acquisition or proposed acquisition by Revco or any of its Subsidiaries of all or any portion of the stock or all or substantially all the assets of any Person, whether or not such Agent or such Revolving Lender is party thereto; or (d) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, discharging or releases from, any real property owned or operated by Revco or any of its Subsidiaries of any Hazardous Material (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under CERCLA, any so-called "Superfund" or "Superlien" law, or any other federal, state, local or other statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability or standards on conduct concerning, any Hazardous Material), regardless of whether caused by, or within the control of, Revco or any of its Subsidiaries; PROVIDED that, notwithstanding the foregoing, Revco shall indemnify each Indemnified Party regardless of whether such Indemnified Party takes possession of any real property owned or operated by Revco or any of its Subsidiaries for all matters for which an Indemnified Party might otherwise be entitled to indemnification by Revco hereunder which have occurred or arisen prior to the time at which such Indemnified Party takes such possession and which are unremediated or continuing, and possession by such Indemnified Party shall not affect Revco's duty and obligation to indemnify such Indemnified Party hereunder, except for such Indemnified Liabilities arising for the account of a particular Indemnified Party which are determined by a final judgment of a court of competent jurisdiction to be attributable solely to such Indemnified Party's gross negligence or willful misconduct; provided 95 87 that, if Revco institutes any action, suit or proceeding against any of the Indemnified Parties and such action, suit or proceeding is unsuccessful, Revco shall indemnify and hold harmless the Indemnified Parties from and against all Indemnified Liabilities arising in connection with or relating to such action, suit or proceeding. If and to the extent that the undertaking described in this Section 11.04 may be unenforceable for any reason, Revco hereby agrees to make the maximum contribution to the payment and satisfication of each of the Indemnified Liabilities which is permissible under Applicable Law. No Indemnified Person shall be responsible or liable to Revco, any of its Subsidiaries, any of their respective successors or assigns, or any other Person asserting claims derivately through any such party, for indirect, punitive, exemplary or consequential damages which may be alleged as a result of this Agreement and the other Credit Documents or the transactions contemplated hereby and thereby. The provisions of this Section 11.04 shall be in addition to any rights that any Indemnified Person may have at law or otherwise, including any rights to contributions. SECTION 11.05. SURVIRAL. The obligations of Revco under Sections 2.04, 3.05, 4.06, 4.07, 11.03 and 11.04, and the obligations of the Revolving Lenders under Section 10.01, shall in each case survive any termination of this Agreement and the payment in full of any or all of the Obligations. The representations and warranties made by Revco and any other Obligor in this Agreement, the Notes and in each other Credit Document shall survive the execution and delivery of this Agreement, the Notes and each such other Credit Document. SECTION 11.06. SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such a manner as to be effective and valid under Applicable Law, but if any provision of this Agreement, the Notes or any other Credit Document is prohibited or unenforceable in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement, the Notes or such other Credit Document or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 11.07. HEADINGS. The various headings of this Agreement, the Notes and of each other Credit Document 96 88 are provided solely for convenience of reference and shall not affect the meaning or interpretation of this Agreement, the Notes or such other Credit Document or any provisions hereof or thereof. SECTION 11.08. COUNTERPARTS. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. SECTION 11.09. GOVERNING LAW; ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTES AND EACH OTHER CREDIT DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAWS. THIS AGREEMENT, THE NOTES AND THE OTHER CREDIT DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO. SECTION 11.10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns, provided that: (a) Revco may not assign or transfer (by operation of law or otherwise) its rights or obligations hereunder without the prior written consent of all Revolving Lenders; and (b) the rights of sale, assignment and transfer by the Revolving Lenders are subject to Section 11.11. SECTION 11.11. ASSIGNMENTS AND PARTICIPATIONS. (a) Any Revolving Lender may, with the written consent of Revco at all times other than during the existence of an Event of Default, and of the Administrative Agent and the LC Issuers, which consents shall not be unreasonably withheld, at any time assign and delegate to one or more Eligible Assignees (provided that no written consent of Revco or the Administrative Agent shall be required in connection with any assignment and delegation by a Revolving Lender to an Eligible Assignee that is an Affiliate of such Revolving Lender or to another Revolving Lender) (each an "Assignee") all or any ratable part of all of the Loans, the Revolving Credit Commitments and its participations in Letters of 97 89 Credit and Swing Loans made with respect to its Revolving Credit Commitment and owing to it and its undivided interest in the Notes (the "Assignable Obligations") provided that: (i) each such assignment shall cover the same aggregate percentage of such Revolving Lender's Assignable Obligations with respect to Loans and such Revolving Lender's Revolving Credit Commitment hereunder; (ii) the amount of the Assignable Obligations or the Revolving Credit Commitment being assigned pursuant to each such assignment unless to a Revolving Lender shall in no event be less than $10,000,000 of such assigning Revolving Lender's Assignable Obligations (or, if less, the entire amount of such assigning Revolving Lender's Assignable Obligations); (iii) no such assignment shall require Revco to file a registration statement with the Securities and Exchange Commission or apply to qualify any Revolving Credit Commitment, Assignable Obligation or interest in any Note, or any interest in any thereof, under the "blue sky" or other securities laws of any-jurisdiction; (iv) such assignment will not result in the payment of additional fees by Revco with respect to any then outstanding Loan, and (v) if because of circumstances in effect on the effective date of any assignment, Revco would, under Sections 2.4, 3.5 or 4.6 of this Agreement, be obligated to make any payment to or for the account of any Assignee, Revco shall only be obligated to make such payment to the extent that it would then have been obliged to make such payment to the assigning Revolving Lender; and PROVIDED FURTHER, that Revco and the Administrative Agent may continue to deal solely and directly with such Revolving Lender in connection with the Assignable Obligations so assigned to an Assignee until (x) written notice of such Assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to Revco and the Administrative Agent by such Revolving Lender and the Assignee; (y) such Revolving Lender and its Assignee shall have delivered to Revco and the Administrative Agent an assignment and acceptance in the form of Exhibit G (an "Assignment and Acceptance") and (z) the assignor Revolving Lender or Assignee has paid to the Administrative Agent a processing fee in the amount of $3,000. (b) From and after the date that the Administrative Agent notifies the assignor Revolving Lender that it has received (and, if necessary, provided its consent with respect to) an executed Assignment and Acceptance and payment of the above-referenced processing 98 90 fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder shall have been assigned to it pursuant to such Assignment and Acceptance shall have the rights and obligations of a Revolving Lender under the Credit Documents and (ii) the assignor Revolving Lender shall, to the extent that rights and obligations hereunder and under the other Credit Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Documents. (c) Immediately upon receipt of the processing fee payment under the Assignment and Acceptance, this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Revolving Credit Commitments arising therefrom. The Revolving Credit Commitment allocated to each Assignee shall reduce such Revolving Credit Commitment of the assigning Revolving Lender pro tanto and the Administrative Agent shall distribute to Revco and the Revolving Lenders a revised Schedule VI reflecting such adjustment. (d) Each Managing Agent agrees that, if as a result of its assignments pursuant to this Section its voting Percentage at any time prior to the termination of the Revolving Credit Commitments pursuant to Section 9.02 or 9.03 shall be less than 2.4%, it will, upon the request of Revco, resign as a Managing Agent hereunder. (e) Any Revolving Lender may at any time sell to one or more commercial banks or other Persons not Affiliates of Revco (a "Participant") participating interests in any loans, Revolving Credit Commitment of that Revolving Lender (the "Originator") hereunder and under the other Credit documents; PROVIDED, HOWEVER, that (i) the Originator's obligations under this Agreement (including its Revolving Credit Commitments to Revco hereunder) shall remain unchanged, (ii) the Originator shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such participation is of a pro rata share of its Revolving Credit Commitments and/or Loans, (iv) Revco and the Agents shall continue to deal solely and directly with the Originator in connection with the originator's rights and obligations under this Agreement and the other Credit Documents, (v) Participants shall be entitled to the cost and yield protection provisions 99 91 contained in Sections 2.04, 3.05, 4.03, 4.06, 4.07, 11.03 and 11.04 of this Agreement to the extent (but solely to the extent) the Originator selling such participation would be so entitled, and (vi) no Revolving Lender shall transfer or grant any participating interest under which the Participant has rights to approve any amendment to, or any consent or waiver with respect to, this agreement or any other Credit Document, except to the extent that such amendment, consent or waiver would require unanimous consent of the Revolving Lenders as described in Sections ll.l(c) and (f). Revco agrees that if amounts outstanding under this Agreement and the Notes are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default each Participant shall, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement and any Note to the same extent as if the amount of its participating interest were owing directly to it as a Revolving Lender under this Agreement or such Note. (f) Any Revolving Lender may, subject to Section 11.17, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 11.11, disclose to any Assignee or participant or proposed assignee or participant any information relating to Revco furnished to such Revolving Lender by or on behalf of Revco. (g) Notwithstanding any other provision in this Agreement, any Revolving Lender may assign all or part of its rights under and interest in this Agreement in favor of any Federal Reserve Bank in accordance with Regulation A of the F.R.S. Board or U.S. Treasury Regulation 31 C.F.R. sec. 203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under Applicable Law. SECTION 11.12. REVCO ASSISTANCE. In order to facilitate the addition of additional Revolving Lenders hereto, Revco agrees to cooperate fully with any Revolving Lender and the Managing Agents in connection therewith, and to provide all reasonable assistance requested by any Revolving Lender and the Managing Agents relating thereto, including the participation by senior management of Revco and its Subsidiaries in meetings or teleconference calls with potential additional Revolving Lenders, upon the 100 92 request of such potential additional Revolving Lenders and the Managing Agents. SECTION 11.13. OTHER TRANSACTIONS. Nothing contained herein shall preclude any Agent, or any Revolving Lender from engaging in any debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Credit Document, with Revco or any of its Affiliates in which Revco or such Affiliate is not restricted hereby from engaging with any other Person. SECTION 11.14. WAIVER OF JURY TRIAL, ETC. REVCO HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT 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, THE NOTES OR ANY OTHER CREDIT DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF THE AGENTS, THE REVOLVING LENDERS, OR REVCO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS, AND SUCH REVOLVING LENDERS ENTERING INTO THIS AGREEMENT. SECTION 11.15. SUBMISSION TO JURISDICTION. REVCO HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN NEW YORK CITY OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE CREDIT DOCUMENTS OR THE NOTES, AND REVCO HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT. REVCO, ON BEHALF OF ITSELF AND EACH SUBSIDIARY, HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT AS WELL AS ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO REMOVE ANY SUCH ACTION OR PROCEEDING, ONCE COMMENCED, TO ANOTHER COURT ON THE GROUNDS OF FORUM NON CONVENIENS OR OTHERWISE. REVCO HEREBY IRREVOCABLY APPOINTS CT CORPORATION SYSTEM (THE "PROCESS AGENT"), WITH AN OFFICE ON THE DATE HEREOF AT 208 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60604, UNITED STATES, AS ITS AGENT TO RECEIVE ON BEHALF OF REVCO AND ITS PROPERTY SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO REVCO IN CARE OF THE PROCESS AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND REVCO HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS 101 93 AGENT TO ACCEPT SUCH SERVICE ON ITS BEHALF. REVCO AGREES TO INDEMNIFY THE PROCESS AGENT IN CONNECTION WITH ALL MATTERS RELATING TO ITS APPOINTMENT AS AGENT OF REVCO FOR SUCH PURPOSES, TO ENTER INTO ANY AGREEMENT RELATING TO SUCH APPOINTMENT WHICH THE PROCESS AGENT MAY CUSTOMARILY REQUIRE, AND TO PAY THE PROCESS AGENT'S CUSTOMARY FEES UPON DEMAND. AS AN ALTERNATIVE METHOD OF SERVICE, REVCO ALSO IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO REVCO AT ITS ADDRESS SPECIFIED PURSUANT TO SECTION 11.02. REVCO AGREES THAT A FINAL, NON-APPEALABLE JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. REVCO AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST ANY AGENT OR ANY REVOLVING LENDER OR THE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY OF ANY THEREOF, ARISING OUT OF OR RELATING TO THIS AGREEMENT, IN ANY COURT OTHER THAN THE ONE HEREINABOVE SPECIFIED IN THIS SECTION. NOTHING IN THIS SECTION, HOWEVER, SHALL AFFECT THE RIGHT OF ANY AGENT OR ANY REVOLVING LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY AGENT OR ANY REVOLVING LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST REVCO OR ITS PROPERTIES IN THE COURTS OF ANY OTHER JURISDICTION. SECTION 11.16. MARSHALLING; RECAPTURE. No Agent nor any Revolving Lender shall be under any obligation to marshall any assets in favor of Revco, any Subsidiary of Revco or any other party or against or in payment of any or all of the Obligations. To the extent any Revolving Lender receives any payment by or on behalf of Revco, which payment or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to Revco or its estate, trustee, receiver, custodian or any other party under any bankruptcy law, state or Federal law, common law or equitable cause, then to the extent of such payment or repayment, the obligation or part thereof which has been paid, reduced or satisfied by the amount so repaid shall be reinstated by the amount so repaid and shall be included within the liabilities of Revco to such Revolving Lender as of the date such initial payment, reduction or satisfaction occurred. SECTION 11.17. CONFIDENTIALITY. Each Revolving Lender agrees to take and to cause its Affiliates to take 102 94 normal and reasonable precautions and exercise due care to maintain the confidentiality of all information identified as "confidential" or "secret" by Revco and provided to it by Revco or any Subsidiary or by any Agent on Revco's or such Subsidiary's behalf, under this Agreement or any other Credit Document, and neither it nor any of its Affiliates shall use any such information other than in connection with or in enforcement of this Agreement and the other Credit Documents or in connection with other business now or hereafter existing or contemplated with Revco or any Subsidiary; except to the extent such information (i) was or becomes generally available to the public other than as a result of disclosure by the Revolving Lender, or (ii) was or becomes available on a non-confidential basis from a source other than Revco, provided that such source is not bound by a confidentiality agreement with Revco known to the Revolving Lenders; PROVIDED that any Revolving Lender may disclose such information (A) at the request or pursuant to any requirement of any governmental agency or representative thereof to which the Revolving Lender is subject or in connection with an examination of such Revolving Lender by any such authority; (B) pursuant to subpoena or other court process; (C) when required to do so in accordance with the provisions of any Applicable Law; (D) to the extent reasonably required in connection with any litigation or proceeding to which any Agent, any Revolving Lender or their respective affiliates may be parties; (E) to the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Credit Document; (F) to such Revolving Lender's independent auditors or other professional advisors; (G) to any Participant or Assignee, actual or potential, PROVIDED that such person agrees in writing to keep such information confidential to the same extent required of the Revolving Lenders hereunder; (H) to any Revolving Lender or its Affiliate, as expressly permitted under the terms of any other document or agreement regrading confidentiality to which Revco or any Subsidiary is a party or is deemed a party with such Revolving Lender or such Affiliate; or (I) to its Affiliates provided further that, unless specifically prohibited by Applicable Law or court order, each Revolving Lender as promptly as practicable shall notify Revco of any request (other than a request in connection with an examination of the financial condition of such Revolving Lender) for disclosure under clauses (A), (B) or (C). IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. [SIGNATURES] -----END PRIVACY-ENHANCED MESSAGE-----