March 31, 2016

Kroger/Harris Teeter (FTC 2014)

Deal SummaryCooperation | Conditions Precedent |Defense Strategy | Litigation Commitments | Remedy Commitments | Reverse Break Fees | Termination Provisions

(a)               Deal Summary. Kroger and Harris Teeter signed a definitive merger agreement on July 9, 2013. Kroger was required to use its “reasonable best efforts” to propose, negotiate, commit to and effect, by consent decree, hold separate order, or otherwise, the sale, divestiture or disposition of assets of Parent or the Company. The parties agreed that either company could initially terminate the transaction eight months after signing (March 30, 2014), though the merger agreement permitted extensions under certain conditions with a maximum of 14 months (September 30, 2014). The deal was completed on January 28, 2014 after the FTC granted early termination of the waiting period on January 17, 2014.

(b)               Cooperation. §5.7(e): Parent and the Company shall cooperate and consult with each other in connection with the making of all filings, notifications, communications, submissions and any other material actions pursuant to this Section 5.7, and, subject to applicable legal limitations and the instructions of any Governmental Entity, Parent and the Company shall keep each other apprised on a current basis of the status of matters relating to the completion of the transactions contemplated thereby, including promptly furnishing the other with copies of notices or other material communications received by Parent and the Company, as the case may be, or any of their respective Subsidiaries or Affiliates, from any third party and/or any Governmental Entity with respect to such transactions. Subject to applicable Law relating to the exchange of information, Parent and the Company shall permit counsel for the other Party reasonable opportunity to review in advance, and consider in good faith the views of the other Party in connection with, any proposed notifications or filings and any written communications or submissions, and with respect to any such notification, filing, written communication or submission, any documents submitted therewith to any Governmental Entity; providedhowever, that materials may be redacted (i) to remove references concerning the valuation of the businesses of Parent, or proposals from third parties with respect thereto, (ii) as necessary to comply with contractual agreements and (iii) as necessary to address reasonable privilege or confidentiality concerns. Parent and the Company agree not to participate in any substantive meeting or discussion, either in person or by telephone, with any Governmental Entity in connection with the proposed transactions unless it consults with the other Party in advance and, to the extent not prohibited by such Governmental Entity, gives the other Party the opportunity to attend and participate.

(c)                Conditions Precedent. §6.1(b), (c): The respective obligations of the Parties to effect the Merger shall be subject to the satisfaction at or before the Effective Time of the following conditions . . .

                        §6.1(b) No Injunctions or Restraints; Illegality. No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition (an “Injunction”) preventing the consummation of the Merger, or any of the other transactions contemplated by this Agreement shall be in effect. No statute, rule, regulation, order, Injunction or decree shall have been enacted, entered, promulgated or enforced by any Governmental Entity that prohibits or makes illegal consummation of the Merger or any other transactions contemplated by this Agreement.

                        (c) Regulatory Approvals. (i) The applicable waiting period under the HSR Act (and any extension thereof) relating to the Merger shall have expired or been earlier terminated and any Agreement with any Governmental Entity not to close the Merger shall have expired or been terminated and (ii) other than the filing of the Articles of Merger, all authorizations, consents, orders or approvals of, or declarations or filings with, or expirations of waiting periods imposed by, any Governmental Entity in connection with the Merger and the consummation of the other transactions contemplated by this Agreement, the failure of which to file, obtain or occur would be reasonably expected to have a Parent Material Adverse Effect or a Company Material Adverse Effect, shall have been filed, been obtained or occurred on terms and conditions which would not be reasonably expected to have a Parent Material Adverse Effect or a Company Material Adverse Effect.

(d)               Defense Strategy. §5.7(f): For purposes of this Section 5.7, “reasonable best efforts” shall include Parent proposing, negotiating, committing to and effecting, by consent decree, hold separate order, or otherwise, the sale, divestiture or disposition of assets of Parent or the Company and otherwise taking or committing to take actions that after the Closing would limit Parent’s freedom of action with respect to, or its ability to operate and/or retain, assets of Parent or the Company; providedhowever, that nothing in this Agreement will require, or be deemed to require, Parent to take any action described in this Section 5.7(f) that would reasonably be expected to result in a “Material Adverse Effect on the Transaction.” “Material Adverse Effect on the Transaction” means a material reduction in the reasonably anticipated economic benefits to Parent of the transactions contemplated by this Agreement measured over a commercially reasonable period.

(e)                Litigation Commitments. §5.7(c): In furtherance and not in limitation of the covenants of the Parties contained in this Section 5.7, each of Parent and the Company shall use its reasonable best efforts to avoid the entry of, or to have vacated, lifted, reversed or overturned any decree, judgment, Injunction or other order, whether temporary, preliminary or permanent, that would restrain, prevent or delay the Closing on or before the End Date.

(f)                Remedy Commitments. §5.7(a), (f): (a) Each of the Parties shall use its reasonable best efforts to take promptly, or cause to be taken, all actions, and to do promptly, or cause to be done, all things reasonably necessary, proper or advisable to obtain all necessary actions or nonactions, waivers, consents, clearances, approvals, or expirations or terminations of waiting periods as may be required by any Law or Governmental Entity.

                        (f) For purposes of this Section 5.7, “reasonable best efforts” shall include Parent proposing, negotiating, committing to and effecting, by consent decree, hold separate order, or otherwise, the sale, divestiture or disposition of assets of Parent or the Company and otherwise taking or committing to take actions that after the Closing would limit Parent’s freedom of action with respect to, or its ability to operate and/or retain, assets of Parent or the Company; provided, however, that nothing in this Agreement will require, or be deemed to require, Parent to take any action described in this Section 5.7(f) that would reasonably be expected to result in a “Material Adverse Effect on the Transaction.” “Material Adverse Effect on the Transaction” means a material reduction in the reasonably anticipated economic benefits to Parent of the transactions contemplated by this Agreement measured over a commercially reasonable period.

(g)               Reverse Break Fees. §7.3(b): The Company shall pay to Parent a termination fee in the amount of Seventy-Five Million Dollars ($75,000,000) (the “Company Termination Fee”) in immediately available funds if: (i) (A) this Agreement is terminated by Parent pursuant to Section 7.1(b), 7.1(d) or 7.1(g); and (B)(1) before such termination, an Acquisition Proposal with respect to the Company was commenced, received by the Company, publicly proposed or publicly disclosed; and (2) within 12 months after such termination, the Company enters into a definitive written agreement relating to an Acquisition Proposal or consummates a transaction contemplated by an Acquisition Proposal; provided, that for purposes of clause (2) above the references to “25%” in the definition of “Acquisition Proposal” shall be deemed to be references to “50%”; (ii) The Company has terminated this Agreement pursuant to Section 7.1(f); (iii) Parent has terminated this Agreement pursuant to Section 7.1(e); or (iv) after receiving an Acquisition Proposal, (A) the Company Board does not take action to convene the Company Shareholder Meeting and (B) within 12 months after such receipt of such Acquisition Proposal, the Company enters into a definitive written agreement relating to an Acquisition Proposal or consummates a transaction contemplated by an Acquisition Proposal. The Company Termination Fee must be paid no later than two Business Days following the event that triggers such payment described in Section 7.3(b)(i), (ii), (iii) or (iv). In the event that Parent shall receive full payment of the Company Termination Fee the receipt of such amount shall be deemed to be liquidated damages and the sole and exclusive remedy of Parent, Merger Sub and their Affiliates against the Company and its Subsidiaries or any of their respective former, current or future equity holders, controlling persons, directors, officers, employees, agents, Representatives, general or limited partners, managers, management companies, members, shareholders, Affiliates or assignees and any and all former, current or future equity holders, controlling persons, directors, officers, employees, agents, general or limited partners, managers, management companies, members, shareholders, Affiliates or assignees of any of the foregoing, and any and all former, current or future heirs, executors, administrators, trustees, successors or assigns of any of the foregoing (collectively, “Company Related Parties”), and no Company Related Party shall have any other liability or obligation for any or all losses or damages suffered or incurred by Parent, Merger Sub or any other Parent Related Parties in connection with this Agreement (and the termination hereof) or any matter forming the basis for such termination, and none of Parent, Merger Sub, any of their respective Affiliates or any other Parent Related Party shall be entitled to bring or maintain any other claim, action or proceeding against the Company, any of its Affiliates or any other Company Related Party arising out of this Agreement, any of the transactions contemplated hereby or any matters forming the basis for such termination. For the avoidance of doubt (A) under no circumstances will Parent or Merger Sub be entitled to amounts in excess of the amount of the Company Termination Fee and (B) while Parent and Merger Sub may pursue both a grant of specific performance in accordance with Section 8.10 and the payment of the Company Termination Fee underSection 7.3(b), under no circumstances shall Parent or Merger Sub be permitted or entitled to receive both a grant of specific performance that results in a Closing and any portion of the Company Termination Fee. The Parties acknowledge and agree that in no event shall the Company be required to pay the Company Termination Fee on more than one occasion, whether or not the Company Termination Fee may be payable under more than one provision of this Agreement at the same or at different times and the occurrence of different events.

(h)               Time Period and Other Conditions Under Which the Parties May Walk Away from the Agreement. §7.1: Termination. This Agreement may be terminated at any time before the Effective Time, whether before or after approval of the matters presented in connection with the Merger by the shareholders of the Company:

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                        (b) Delay. By either the Company or Parent, if the Merger shall not have been consummated on or before March 31, 2014 (the “End Date”); provided, however, that if on March 31, 2014 any of the conditions to Closing set forth in Section 6.1(b) or 6.1(c) shall not have been satisfied or duly waived by the Party or Parties entitled to the benefit of such condition but all other conditions to Closing set forth in Article VI shall have been satisfied (other than those conditions that by their nature cannot be satisfied until the Closing Date, but which would be capable of being satisfied if the Closing Date occurred on the End Date) or waived, then the End Date shall be automatically extended without further action of the Parties to (and including) June 30, 2014; provided, further, that if on June 30, 2014 any of the conditions to Closing set forth in Section 6.1(b) or 6.1(c) shall not have been satisfied or duly waived by the Party or Parties entitled to the benefit of such condition but all other conditions to Closing set forth in Article VI shall have been satisfied (other than those conditions that by their nature cannot be satisfied until the Closing Date, but which would be capable of being satisfied if the Closing Date occurred on the End Date) or waived, then the End Date shall, at the option of the Company or Parent (exercised by written notice to the other Parties) be extended to (and including) September 30, 2014 (and, provided, further, that the right to terminate this Agreement pursuant to this Section 7.1(b) shall not be available to any Party whose failure to fulfill any obligation under this Agreement has been a principal cause of or resulted in the failure of the Merger to occur on or before the End Date (as extended, if applicable));

                        (c) No Regulatory Approval. By either Parent or the Company if a Governmental Entity of competent jurisdiction shall have issued a nonappealable final order, decree or ruling or taken any other nonappealable final action, in each case having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger (provided, that the right to terminate this Agreement under thisSection 7.1(c) shall not be available to any Party whose failure to fulfill any obligation under this Agreement has been a principal cause of or resulted in such order, decree, ruling or other action);